The Front Page, Asset Management & Investment Funds: Irish Practice Developments
Irish authorised investment fund may acquire Chinese shares via the Shanghai-Hong Kong Stock Connect programme
The Central Bank of Ireland (the Central Bank) permits Irish authorised investment funds to acquire Chinese shares via the Shanghai-Hong Kong Stock Connect programme. The Central Bank has set the following conditions:
- The depository must to satisfy itself that the manner in which the shares are to be held meet with the requirements of the UCITS/AIFM Regulations and any conditions imposed by the Central Bank.
- The depository or an entity within its custodial network (i.e. a sub-custodian) must ensure that it retains control over the shares at all times.
- The depository (or its sub-custodian) must be a participant in the Hong Kong Securities Clearing Company Ltd (HKSCC) (arrangements where the broker of the investment fund is a participant of HKSCC but not an entity within the depositary's custodial network, will not satisfy the provisions of the relevant legislation).
- The depository or a member of its custodial network can be a General Clearing Participant, Direct Clearing Participant or Custodian Participant as appropriately determined by the depositary in line with its legal obligations as depositary.
- The depository must keep under review the Stock Connect infrastructure arrangements to ensure that its legal obligations can be met.
This clarification is set out in an updated UCITS Q&A (6th edition dated 15 July 2015) at Q&A 1015, pg. 6 and an updated AIFMD Q&A(14th edition dated 15 July 2015) at Q&A 1094, pg. 7.
For more information see our In Focus paper here.
The sole object of a UCITS ICAV
The Central Bank clarified the position with regard to consistency between the sole object provisions of the ICAV Act 2015 and the UCITS Regulations from 2011, 2012 and 2014. A UCITS ICAV’s instrument of incorporation should include the text set out in section 6(3)(a) of the ICAV Act 2015 which will also satisfy the requirements of the UCITS Regulations. This clarification is set out in an updated UCITS Q&A (6th edition dated 15 July 2015) at Q&A 1014, pg. 5.
QIAIFs investing more than 50% of net assets in an unregulated investment fund
The Central Bank has clarified that a QIAIF availing of the flexibility to invest more than 50% of net assets in an unregulated investment fund must also comply with the requirement to attach the periodic reports of the underlying investment fund to its own periodic reports. This clarification is set out in the updated AIFMD Q&A (14th edition dated 15 July 2015) at Q&A ID 1095.
Central Bank Guidance on Directors' Time Commitments - Q&A
The Central Bank has issued clarification in respect of its risk indicator in relation to directors with high numbers of directorships (set out in its Guidance on Directors’ Time Commitments (which is explored in our In Focus paper and in our June Front Page). The risk indicator refers to an internal Central Bank risk indicator of (a) 20 directorships and (b) having an aggregate annual professional time commitment in excess of 2000 hours. This ‘20’ number refers only to Irish authorised investment funds and Irish authorised fund management companies (UCITS management companies, AIFM and AIF management companies) directorships. Risks linked to the scale of other directorships held by an individual are captured in the calculation and assessment of aggregate professional time commitments. This cl arification is set out in a new Q&A on the Central Bank's Guidance on Directors' Time Commitments.
Central Bank Markets Update.
On 15 July 2015 the Central Bank published Issue 4 of 2015 of its Markets Update which looked at;
Central Bank of Ireland
- CP 96 - Consultation on the Authorisation Requirements and Standards for Credit Servicing Firms and Consequential Amendments to Statutory Codes.
- CP 95 - Joint Public Consultation Paper of the Department of Finance and the Central Bank of Ireland Funding the Cost of Financial Regulation.
- Central Bank of Ireland's Guidance on Directors' Time Commitments - Q&A (discussed above).
- Sixth Edition of the UCITS Q&A Published (discussed above).
- Fourteenth Edition of the AIFMD Q&A Published (discussed above).
European Securities and Markets Authority (ESMA)
- ESMA published the Final Report and Draft RTS on prospectus related issues under the Omnibus II Directive.
- ESMA published an Opinion on the equivalence of the Israeli prospectus regime.
- ESMA issued Q&A on anti-money laundering and investment-based crowd funding platforms (discussed below).
- ESMA published its Final Guidelines on Alternative Performance Measures (APMs) for listed issuers.
- ESMA consulted on regulatory technical standards under CSD Regulation.
- ESMA published Final Report on MiFID II-MiFIR draft technical standards on authorisation, passporting, registration of third country firms and cooperation between competent authorities.
- European Supervisory Authorities published Technical Discussion Paper on Risk, Performance Scenarios and Cost Disclosures in Key Information Documents for Packaged Retail and Insurance-based Investment Products (PRIIPs). (discussed below)
- ESMA asked Commission to delay CSDR technical standards.
International Organisation of Securities Commissions (IOSCO)
- IOSCO seeks better understanding of other CRA products and services.
- IOSCO consulted on International Standards on Fees and Expenses of Investment Funds (discussed below).
Consultation on Funding the Costs of Financial Regulation
The Central Bank and the Department of Finance published a joint consultation paper (CP95) entitled Funding the Cost of Financial Regulation. The paper outlines a number of proposed changes to the current funding structure, and considers a variety of topics including:
- the case for full industry funding;
- the current regulatory cost model;
- the future cost of financial regulation;
- international comparisons;
- domestic comparisons; and
- the regulatory landscape for each of the regulated sectors.
The consultation suggests that any change to the funding levy arrangements will have due regard to the impact on not just the financial services sector and individual firms but also to the fiscal impact and any potential impact on consumers. The consultation will close on 25 September 2015. Please speak with your usual contact on the A&L Goodbody Asset Management & Investment Funds team if you wish to comment on the consultation.
Irish Funds paper comparing IFRS with FRS 102 as they apply to investment funds
The Financial Reporting Working Group of Irish Funds has prepared a paper that highlights the differences between International Financial Reporting Standards as adopted by the European Union (IFRS) and the recently developed FRS 102 (the New Irish GAAP) as they apply to investment funds. The paper focuses on the main differences between the two GAAPs as they relate to valuation of investments, key disclosures, consolidation and revenue recognition for investment funds. This may assist Irish investment funds in deciding whether to report under IFRS or FRS 102.
For more information please contact Nollaig Greene or a member of the Asset Management & Investment Funds Team.
Date published: 30 July 2015