To coincide with back to school season, we are including a Question of the month in the Front Page. We invite readers to send topical questions which would be of general interest to readers to A&L Goodbody Investment Funds. Each month we will choose a question and publish the question and answer. We look forward to hearing from you.
Q: Did the Central Bank clarify its position on whether SFTR "grandfathering" applies at umbrella level?
A: Yes, the Central Bank clarified its position on whether SFTR "grandfathering" applies at umbrella level. The Central Bank issued a UCITS Q&A (Q&A 1062) and AIFMD Q&A (Q&A 1103), the UCITS version of which is restated below.
Q: Article 33(2)(c) of Regulation (EU) 2015/2365 on transparency of securities financing transactions and of reuse and amending Regulation (EU) No 648/2012 (‘SFTR’) provides a transitional arrangement for collective investment undertakings subject to UCITS that are constituted before 12 January 2016. Should sub-funds established after 12 January 2016 avail of this transitional arrangement?
A: The Central Bank strongly recommends that any new sub-fund include in its prospectus documentation the SFTR required disclosure on the use of SFTs and total return swaps. SFTs and total return swaps are used at sub-fund level rather than umbrella level. Accordingly, the SFTR disclosures are required at sub-fund level. Further, the term ‘collective investment undertaking’ is used in the context of sub-funds throughout the SFTR. For example, recital 16 refers to a “collective investment undertaking’s investment strategy” and recital 20 refers to “a collective investment undertaking’s investment policy” and investment policies apply at sub-fund rather than umbrella level. Accordingly, new sub-funds should make the disclosures required by the SFTR. Should the European Commission suggest a different approach, this position will be revisited by the Central Bank and, if necessary, revised to align it with that approach.