Asset Management & Investment Funds: Irish Practice Developments - Oct 2021
Asset Management & Investment Funds: Irish Practice Developments - Oct 2021
Some approaching compliance deadlines
31 December 2021 -UCITS Liquidity Risk Management review - The CBI wrote to all Irish authorised UCITS managers about LRM. The CBI has emphasised how seriously it takes the findings of the CSA, which was co-ordinated by ESMA. All Irish authorised UCITS ManCos and SMICs are required to conduct a specific review of their practices, documentation, systems and controls. This review must be documented and must include details of actions taken to address any of the findings in the ESMA public statement on the CSA and the CBI's letter on the topic. This review has to be completed and an action plan discussed and approved by the board of each UCITS ManCo and SMIC by the end of Q4 2021.
31 December 2021 - Corporate Governance - Completion of reviews of board and individual director performance. Under the Irish Funds Corporate Governance Code, the overall board's performance and that of individual members must be reviewed annually. Once every three years a formal documented review and a review of the chairperson must take place. Length of service and ongoing independence of directors, as well as gender diversity at board level, should be considered in line with the CBI's CP86 expectations. Compliance with procedures for dealing with conflicts of interest and the terms of reference of any board committees should be reviewed at least on an annual basis.
31 December 2021 -Anti-Money Laundering/ Combatting the Financing of Terrorism -Designated Persons (including UCITS ManCos, self-managed UCITS, AIFMs and internally managed AIFs) should be aware of the regulatory expectation to offer training to their boards on the law relating to AML/CFT on an annual basis (and at such other times as may be appropriate). The CBI expects boards to have in place a defined process for the annual review of AML/CFT policies, including AML/CFT business risk assessments. Where the board has adopted a board level AML/CFT policy, it should ensure that it receives appropriate confirmations from relevant persons.
31 December 2021 - Business Plan/Programme of Activity- UCITS ManCos, self-managed UCITS, AIFMs and internally managed AIFs, where they have not already done so, may need to complete their annual performance review on service providers. FMCs delegating functions must maintain adequate oversight and perform ongoing due diligence on delegates. Accordingly, FMCs should review and confirm their delegate due diligence plans, including making preparations for any necessary on-site visits. FMCs should also obtain annual confirmations from service providers and relevant persons in accordance with their business plan/programme of activity, complete onsite visits with service providers (albeit remotely), ensure adoption of valuation policy and make disclosure in respect of connected party transactions.
31 December 2021 - Fitness & Probity- Where they have not already done so, RFSPs will need to obtain their annual certification from persons performing PCFs (e.g. directors) and CFs (e.g. money laundering reporting officer and company secretary) that they are aware of the F&P standards, agree to continue to abide by those standards and will notify the board if they no longer comply. This forms part of ongoing performance monitoring set out in Section 22 of the Guidance on Fitness and Probity Standards.
31 December 2021 - Central Register of Beneficial Ownership of CFVs- The deadline for filing refreshed beneficial ownership information on the CBI's central register of beneficial ownership for CFVs is likely to be 31 December 2021.
1 January 2022 -Taxonomy disclosures - Compliance with Level 1 disclosure requirements under the Taxonomy Regulation – the following summary is subject to any communication or guidance from EC / ESMA / CBI. For UCITS and AIFs this will mean taxonomy-related disclosures should be made in fund prospectuses and/or supplements for funds classified under SFDR as Article 8 products promoting environmental characteristics and Article 9 funds with an environmental objective. Website disclosure under Article 10 SFDR should also be updated to reflect updated prospectus / supplement disclosure. Funds classified as neither Article 8 or Article 9 products should include a negative Taxonomy statement in prospectuses.
31 January 2021/ 28 February 2021 - Fitness & Probity- RFSPs will need to submit their annual PCF Confirmation Return to the CBI. The submission due date for the annual PCF Confirmation Return (for the year ending 31/12/21) for UCITS ManCos and for AIFMs is likely 31 January 2022. The submission due date for investment funds will likely be 28 February 2022. The current annual PCF Confirmation Return and associated reporting date and submission deadline for each entity will be detailed on the ONR system.
The Annual PCF Confirmation Return is made via the ONR system and involves a mandatory declaration to confirm that the CEO or equivalent, has confirmed in writing that:
the RFSP has brought the standards to the attention of all PCFs
the RFSP is satisfied, on reasonable grounds, that all PCFs comply with the standards
the written agreement of all PCFs to abide by the standards has been obtained
all necessary due diligence has occurred
the RFSP will investigate any fitness and probity concerns, take appropriate action and notify the CBI of any action taken without delay
RFSPs must obtain an annual certification from the holders of PCFs that they are aware of the F&P standards, will notify the board if they no longer comply with the standards and agree to continue to abide by those standards. The CBI noted in its “Dear CEO” letter dated 17 November 2020 that it expects the on-going due diligence process for the holders of controlled functions to be updated annually and to extend beyond annual self-declarations, which is a minimum requirement.
31 January 2022-UCITS ManCo and AIFM ownership confirmation - UCITS ManCos and AIFMs must file their annual ownership confirmation by 31 January 2022.
2 February 2022 –CBDF - AIF and UCITS marketing communications must comply with ESMA's Guidelines on marketing communications under CBDF by 2 February 2022.
21 February 2022 - UCITS KIID - A UCITS must update its KIID on an annual basis for each sub-fund/ standalone fund within 35 business days of the end of each calendar year. The annual update of the KIID must be filed no later than 21 February 2022 (where required). The submission deadline for each entity will be detailed on the ONR system. Any update to the KIID filed with the CBI must be translated (as necessary) and filed in any other host jurisdictions where the UCITS is registered to market its shares and must then be uploaded on the UCITS' website. AIFs which have issued a PRIIPs KID must review KIDs regularly, when there is a significant change, and at least annually. The KID must be revised as necessary. Unlike the UCITS KIID, there is no annual refresh deadline. UCITS are currently exempt from the obligation to produce a PRIIPs KID until 1 July 2022.
28 February 2022 - Fund Profile Return - The annual CBI Fund Profile Return is required for all Irish authorised sub-funds. It is to be prepared for the period up to 31 December 2021, with a submission deadline (via the ONR) of 28 February 2022. The CBI does not anticipate that the fund profile will change from year to year, as changes would most probably reflect changes within the fund's offering documents. Therefore, year-to-year updates to the fund profile are expected to be minimal and reflect significant changes. The CBI has issued guidance and a template.
1 July 2022-SFDR - Target date for compliance with Level 2 SFDR and EU Taxonomy-related disclosures which will require updates to prospectuses and/ or supplements for funds classified under SFDR as Article 8 and Article 9 products. This includes template pre-contractual product disclosures as an annex.
1 July 2022- PRIIPs KID - AIFs which issue a PRIIPS KID (where they are being marketed to EEA retail investors) and UCITS funds will be required to issue a PRIIPS KID which complies with updated RTS by 1 July 2022.
1 Aug 2022 -UCITS/ AIFMD sustainability disclosures - Requirements under the UCITS Directive and AIFMD to integrate sustainability risks and factors will require updates to Fund documentation.
The above list does not cover tax, FATCA or CRS filings, director's compliance statement obligations (which apply to listed UCITS VCCs), diversity reporting obligations (which may apply to listed AIF and UCITS VCCs), ad hoc filings (such as regulatory reports) or filings of annual accounts (and related documents which include annual FDI returns) and semi-annual accounts or other similar returns (which deadlines vary to reflect the particular entity's year-end).
By way of example, the Companies (Accounting) Act 2017 obliges UCITS investment companies and AIF investment companies to file annual accounts with the CRO within eleven months of their financial year-end. The CBI set out the reporting requirements for UCITS management companies and the reporting requirements for AIF management companies.
CBI approach to the application of the guidelines on marketing communications under the Regulation on cross-border distribution of funds
The Central Bank of Ireland (CBI) published a notice of intention in relation to the application of the ESMA guidelines on marketing communications under the Regulation on cross-border distribution of funds (ESMA CBDF Marketing Guidelines). The CBI expects full compliance with the ESMA CBDF Marketing Guidelines in line with their application date of 2 February 2022.The CBI will consult on the incorporation of a provision into both the Central Bank UCITS Regulations and AIF Rulebook setting out that compliance with the ESMA CBDF Marketing Guidelines is required
CBI Q&A on the treatment of investments, by QIAIFs and RIAIFs, in UK AIFs originally authorised as UK UCITS.
The CBI is currently considering the treatment of investments, by QIAIFs and RIAIFs, in UK AIFs originally authorised as UK UCITS. During this period, such UK AIFs can be treated as a category 2 investment fund. This is reflected in new Q&As 1149 and 1150 of the CBI's AIFMD Q&A (42nd edition).
The CBI clarified that the statement in paragraph 47 of the ESMA CBDF Marketing Guidelines (required when information on past performance is presented) satisfies the requirement of Schedule 6 (11) of the Central Bank UCITS Regulations. This is reflected in new Q&A 1103 of the CBI's UCITS Q&A (34th edition).
The CBI clarified that, for RIAIFs, the statement set out in paragraph 47 of the ESMA CBDF Marketing Guidelines (required when information on past performance is presented) satisfies the requirement of provision 9.36 of the CBI Consumer Protection Code. This is reflected in new Q&A 1148 of the CBI's AIFMD Q&A (42nd edition).
Submission to CBI on 1 January 2022 taxonomy disclosure
Irish Funds made a written submission to the CBI in relation to the Level 1 EU Taxonomy related disclosures to be made by 1 January 2022 for funds classified under SFDR as Article 8 products promoting environmental characteristics and Article 9 funds with an environmental objective. The submission highlighted that funds which do not consider that they will be able to calculate the extent of their taxonomy-aligned investments by 1 January 2022 because of lack of sufficient data and who will not, therefore, be able to make the quantitative disclosure required by the EU Taxonomy Regulation, are considering the inclusion of disclaimers in their prospectus documents to reflect this. Irish Funds suggested a sample non-standard disclaimer. It remains to be seen how or if the CBI responds.
CBI speech at the A&L Goodbody Corporate Crime and Regulation Summit – CBI Director General of Financial Conduct, Derville Rowlandon the evolution of enforcement at the CBI
how the new Senior Accountability Regime will help achieve transparency within firms by clearly setting out where responsibility lies
the new enforceable Conduct Standards which enunciate the obligations placed on firms and their staff clear
the enhancement of the CBI's Fitness and Probity Regime
the improvement of the CBI's Administrative Sanctions Procedure, allowing individuals to be pursued directly for misconduct
Ms. Rowland is hopeful that the CBI (Individual Accountability Framework) Bill will be enacted by mid-2022.
Climate risk and sustainable finance are a strategic focus for the CBI
The CBI in the coming weeks will be writing to all regulated firms on the topic of climate change, its intersection with finance, sustainable finance and the CBI's expectations and position in this regard. In this context climate risk and sustainable finance are a strategic focus for the CBI.
Governor Gabriel Makhlouf announced this in his interview on 12 October at Climate Finance Week Ireland 2021. He said he will make an announcement in a few weeks' time about convening a forum for regulated entities and other stakeholders to share and leverage knowledge about the implications of climate change for the financial sector.
As noted in our AMIF bulletin of June 2019, the CBI is gradually moving towards financial services firms paying 100 per cent of the costs of financial services regulation and supervision. Fees for funds and funds service providers are due to increase to 100% recovery rates by levy year 2021 (which will be levied in 2022). 2021 levies reflect a 90% recovery rate.
Beneficial Ownership developments
The CBI provided an update in relation to Q4 2021 changes which the CBI had previously advised and further changes which are expected in Q2 2022 in relation to reporting of beneficial ownership information to the Beneficial Ownership Register of Certain Financial Vehicles (CFVs which include ICAVs, unit trusts, CCFs and ILPs). The CBI have flagged that a resubmission of all CFV beneficial ownership details will be required by the CBI in December 2021, using a new filing template.
For the purpose of resubmission, a partially pre-populated return will be accessible via the ONR for appropriately authorised users within the CFV. Based on the current beneficial ownership information available on the register, pre-population will include the beneficial owner name, date of birth, address and the date they were entered on the register. Eligible entities will be required to review and correct existing information and complete any unpopulated fields in the return. Pre-populated returns will only be available for a period of 30 days, following which all submissions must be made via a blank version of the new template. The collection will be in December 2021 and the precise collection window will be communicated closer to this time.
The collection of beneficial owner PPS number details will now be decoupled from this suite of changes and will be collected from Q2 2022.