CP86 – Conclusions of CBI thematic review of fund management companies’ governance, management and effectiveness

The Central Bank of Ireland (CBI) has issued an industry letter to all UCITS management companies, authorised AIFMs, self-managed UCITS investment companies/ ICAVs and internally managed AIFs which are authorised AIFMs (together FMCs), following the conclusion of its thematic inspection of compliance with its Fund Management Companies – Guidance (Guidance). It is encouraging to note the review's finding that, when applied correctly, the rules and guidance provide a framework of robust governance, management and oversight arrangements.    

The CBI's industry letter sets out the key findings from its review. The CBI also issued Risk Mitigation Programme (RMP) letters to some FMCs.

Key findings

• Resources: CBI expectation that all FMCs have a minimum of 3 full time locally based employees or equivalent and full-time DP roles for larger FMCs
• Designated Persons: Focus on time commitments
• Delegate oversight: Focus on due diligence of delegates, a formal process where reliance is placed on group policies, all delegate arrangements should be governed by a SLA
• Risk management framework: Focus on entity specific risk register and defined risk appetite
• Board approval of new funds: Boards should be involved early in the process of formulating the investment strategy of a new fund
• Director for Organisational Effectiveness: CBI commentary on their expectations of the OED role

The review also identified findings on governance and culture trends not specifically covered by the current guidance. These findings include an expectation that all but the smallest FMCs should have a CEO, query the continued independence of non-executive directors on the board for prolonged periods of time and identify gender imbalance on boards.

The CBI expects all FMCs to take immediate action to consider the findings in the industry letter and ensure board approval of an action plan by end Q1 2021.

Next steps

FMCs will need to:

• Review the content of the industry letter and any RMP they may have received
• Identify any issues the FMC needs to deal with
• Devise an action plan to ensure full compliance with the Guidance, industry letter and any RMP received
• Agree and ensure board approval of the action plan by end Q1 2021
• Implement the action plan.

For more information or assistance in dealing with any of these issues, you can contact a member of the A&L Goodbody Asset Management & Investment Funds team. 

Date published: 20 October 2020