The Front Page, Asset Management & Investment Funds: Irish Practice Developments
Some Approaching Deadlines
- 31 December 2016. 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 with a formal documented review and a review of the chairperson taking place at least once every three years.
- 31 December 2016. Anti-Money Laundering/Counter Terrorist Financing (AML/CTF) - collective investment schemes and management companies should be aware of the regulatory expectation to offer training to their boards on the law relating to AML/CTF on an annual basis (and at such other times as may be appropriate). Boards should also ensure that they have considered whether to adopt a board level AML/CTF policy and where the board has adopted such a policy, that it receives appropriate confirmations from relevant persons and that it is subject to periodic review.
- 31 December 2016. Business Plan/Programme of Activity - UCITS management companies, 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, and obtain annual confirmations from service providers and relevant persons in accordance with their business plan/programme of activity, complete onsite visits with service providers, ensure adoption of valuation policy and make disclosure in respect of connected parties transactions.
- 31 December 2016. Fitness & Probity - management companies, AIFMs, self-managed/internally - managed UCITS/AIFs and other regulated financial service providers (RFSPs), where they have not already done so, will need to obtain their annual certification from persons performing PCFs (e.g. directors) and CFs (e.g. Money Laundering Reporting Officer (MLRO) and Company Secretary) that they are aware of the Fitness and Probity 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. The Annual PCF Confirmation Return due date (for the year ending 31/12/16) for Investment Funds and Fund Service Providers (including AIFMs and UCITS management companies) is 28 February 2017.
- 1 January 2017. Remuneration guidelines ESMA published two sets of Guidelines: Guidelines on Sound Remuneration under UCITS (UCITS Remuneration Guidelines) and Guidelines on Sound Remuneration under the AIFMD (AIFMD Remuneration Guidelines). The UCITS Remuneration Guidelines provide clarity on the requirements under the UCITS Directive for UCITS management companies when establishing and applying a remuneration policy for key staff. The AIFMD Remuneration Guidelines amend the current Guidelines on sound remuneration policies under the AIFMD. The amendment relates to the section of the Guidelines dealing with the application of the remuneration rules in a group context and is intended to acknowledge the potential outreach of the Capital Requirements Directive rules in a banking group. Both sets of Guidelines apply from 1 January 2017.
- 20 February 2017. UCITS KIID - Annual update of the key investor information document (KIID) must be filed no later than this date (where required). Any update to the KIID filed with the Central Bank must be translated (as necessary) and filed in any other host jurisdictions where the UCITS is registered to market its shares and uploaded on the UCITS' website.
The above list does not cover ad hoc filings (such as regulatory reports) or filings of annual accounts (and related documents which include annual FDI Return) and semi-annual accounts or other similar returns which deadlines will vary to reflect the particular entity's year ends.
CP86 - Central Bank Guidance on Fund Management Company Effectiveness, Feedback Statement and Updated Q&As
As detailed in our Front Page News Alert the Central Bank of Ireland (Central Bank) published its final guidance for fund management companies on managerial functions, operational issues and procedural matters together with its feedback statement on CP 86 (Third Consultation). In addition the Central Bank has also updated a number of its Q&As.
Of particular interest to the funds industry is the Rule on Effective Supervision requirement. The final requirement is summarised below:
A management company shall conduct a preponderance of its management in the EEA.
Where a management company has a PRISM impact rating of:
a) Medium Low or above, the management company shall have at least -
i. 3 directors resident in the State or, at least, 2 directors resident in the State and one designated person resident in State,
ii. half of its directors resident in the EEA, and
iii. half of its managerial functions performed by at least 2 designated persons resident in the EEA, or
b) Low, the management company shall have at least -
i. 2 directors resident in the State,
ii. half of its directors resident in the EEA, and
iii. half of its managerial functions performed by at least 2 designated persons resident in the EEA.
We would note that self-managed UCITS or internally managed AIFs have a PRISM rating of Low. The A&L Goodbody Asset Management & Investment Funds team will issue a detailed note on the new requirements shortly
Central Bank to accept applications for investment via Shenzhen Connect
The Central Bank of Ireland has advised Irish Funds that it is in a position to accept applications from Irish domiciled UCITS and AIFs to invest through the Shenzhen-Hong Kong Stock Connect (Shenzhen Connect) programme, which launched on 5 December 2016.
Shenzhen Connect is a joint initiative between the Stock Exchange of Hong Kong (SEHK) and the Shenzhen Stock Exchange (SZSE), as well as their respective clearing entities, and enables international investors to purchase shares listed on the SZSE. The market infrastructure arrangements under Shenzhen Connect replicate those provided for under the original Shanghai-Hong Kong Stock Connect (Shanghai Connect) model, launched in November 2014.
Central Bank AIFMD Q&A
On 19 December 2016, the Central Bank published 22nd Edition of the AIFMD Q&A. The AIFMD Q&A sets out three new questions and amends the reply to one previous question, as detailed below.
- Existing question 1094 (setting out requirements for an Irish authorised AIF seeking to acquire Chinese shares through the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect infrastructure) has been updated.
- New question 1112 has been added to set out requirements for an existing QIAIF with a wholly owned Irish subsidiary that is converting to a private company limited by shares (CLS).
- New questions 1113 – 1115 have been added to set out the transitional arrangements for an authorised external AIFM or an authorised internally managed AIF to comply with the final CP86 rules and guidance.
- New question 1116 has been added to note that the Central Bank does not permit sub-funds within umbrella funds (including ICAVs) to have separate auditors.
Central Bank UCITS Q&A
On 19 December 2016, the Central Bank published a 15th Edition of the UCITS Q&A. The UCITS Q&A sets out three new questions, amends one question and deletes and replaces one question.
- Existing question 1015 (setting out requirements for an Irish authorised UCITS seeking to acquire Chinese shares through the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect infrastructure) has been updated.
- Question ID 1053 (setting out the transitional arrangements for an authorised UCITS/ Manco to comply with the final CP86 rules and guidance) has been deleted and replaced.
- New questions ID 1073 has been added to note that the Central Bank does not permit sub-funds within umbrella funds (including ICAVs) to have separate auditors.
- New Questions 1074 and 1075 have been added to set out more detail on the transitional arrangements for an authorised UCITS or Manco to comply with the final CP86 rules and guidance.
Central Bank Markets Update
On 19 December 2016, the Central Bank published Issue 8 of 2016 of its Markets Update which highlighted the topics below.
Central Bank of Ireland
- Address by Michael Hodson, Head of Investment Firms and Funds Services at EY Funds Forum 2016 on The Regulatory Perspective
- Thematic review of outsourcing arrangements for Investment Firms, Fund Managers and Fund Service Providers
- CP86 Third Consultation Feedback Statement (see above)
- CP86 Guidance Document (see above)
- AIFMD Q&A - Twenty-Second Edition Published (see above)
- UCITS Q&A - Fifteenth Edition Published (see above)
- The European Commission announces political agreement on a new prospectus regulation
ESMA (European Securities and Markets Authority)
- ESMA updates AIFMD Q&A (see below)
- ESMA updates MiFID II Q&A on Investor Protection
- ESMA consults on extending aggregated trade repository data
- ESMA recognises ICE Clear US Inc. as third-country CCP under EMIR
- ESMA sees continued high levels of market risks
- ESMA European Rating Platform
Central Bank - Director appointments in Markets Supervision and Financial Stability
The Central Bank announced three appointments at Director level.
- Micheal Hodson appointed Director of Asset Management Supervision from January 2017.
- Mary O'Dea appointed Director of Securities and Markets Supervision from September 2017. In the interim, Grainne McEvoy, Head of Securities and Markets Supervision, has been appointed acting Director of Securities and Markets Supervision with effect from the 1 January 2017.
- Maurice McGuire appointed Director of Financial Stability from July 2017.
Central Bank Anti-Money Laundering bulletin
The Central Bank issued an Anti-Money Laundering bulletin on 6 December 2016.The bulletin is the first in a series and focuses on Third Party Reliance which is a specific key cross sectoral area of AML/CFT compliance. Future bulletins may cover similar cross sectoral or sectoral specific areas, as issues arise as part of the Central Bank’s ongoing engagement with firms.
Address by Derville Rowland, Central Bank Director of Enforcement to Compliance Ireland
On 2 December 2016, Derville Rowland, Central Bank Director of Enforcement delivered an address to Compliance Ireland and discussed recent developments in AML supervision, national developments (such as the publication of the National Money Laundering and Terrorist Financing Risk Assessment), the ongoing FATF assessment, some of the current AML challenges faced by supervisors and compliance professionals as well as Enforcement of AML breaches.
The Central Bank - outcome of a themed review to assess the operation of the risk function
The Central Bank published the outcome of a themed review to assess the operation of the risk function by reviewing risk frameworks and risk culture across Investment Firms, Fund Service Providers and Stockbrokers, on 5 December 2016. The Central Bank issued a letter on the topic and would encourage all boards of directors to consider how it is addressing these aspects of the risk management framework. Where issues have been identified with individual firms the Central Bank will follow up directly with firms concerned to address these issues.
Irish Funds Q&A paper on keeping customer due diligence up to date
Irish Funds, through the Anti-Money Laundering Working Group, has produced an industry Q&A paper (AML Q&A) on the application of the Criminal Justice Act 2010 (as amended) in relation to keeping customer due diligence (CDD) up to date. The AML Q&A is an addendum to the previous AML Sectoral Guidelines and provides helpful guidance on the following questions:
- In what circumstances, and how often, should CDD held for existing investors be revisited?
- What actions are required to keep CDD documents and information for existing investors “up-to-date”?
Irish Funds Q&A paper on SFTR - Article 13 Disclosures
Irish Funds, through the Industry Financial Reporting Working Group, has produced a Q&A paper (SFTR Q&A) in relation to the EU Securities Financing Transactions Regulation 2016 (SFTR) - Article 13 disclosures. The SFTR Q&A is a follow up to the general update in the Financial Reporting Brief dated August 2016 and provides further guidance on a number of areas.
For more information please contact a member of the Asset Management & Investment Funds Team.
Date published: 21 December 2016