Asset Management & Investment Funds: Irish Practice Developments: July 2019

Updated Central Bank Guidance on the use of financial indices by UCITS

The Central Bank of Ireland (Central Bank) issued updated guidance on the use of financial indices by UCITS on 23 July 2019. The certification process initially introduced by the Central Bank in October 2018 guidance was welcome. That guidance has been further updated to clarify the circumstances where an index certification is not required.

This has alleviated a possible interpretation of the 2018 guidance which would require certification and record-keeping requirements in situations which was disproportionate to the UCITS investment in financial indices. For example where the UCITS on a "look-through" basis could invest directly in the assets composing the index. Instead, a confirmation that the financial index meets the regulatory requirements must be given to the Central Bank by the UCITS.

UCITS exemption to produce and provide a PRIIPs KID

As indicated previously, the date of the UCITS exemption to produce and provide a PRIIPs KID has been extended by two years to 31 December 2021. This is legislated for in the Directive on the Cross-Border Distribution of Collective Investment Funds (CBDF), which is discussed further under EU & International Developments.

The Central Bank issued the 27th Edition of the Central Bank UCITS Q&A which reflects the extension of the UCITS exemption.  Q&A 1087 notes that UCITS are required to produce a PRIIPs KID. UCITS are exempt from the obligations to produce a PRIIPs KID until 31 December 2021.  The Central Bank will not require UCITS to produce a PRIIPs KID in advance of that date. The UCITS KIID requirements continue to apply.

Update of the Investment Limited Partnership Act and the ICAV Act

The Irish Government published the Investment Limited Partnerships (Amendment) Bill 2019 which substantially overhauls the Investment Limited Partnership Act 1994. This will bring welcome changes that will help make Ireland an attractive location for the setting up of regulated limited partnerships. The Bill also includes amendments to the ICAV Act. Go to publication

Action required following Central Bank thematic review of closet indexing

The Central Bank published the outcome of a review of UCITS funds on the subject of closet indexing.  The review highlighted issues around the effectiveness of investor disclosure and the legitimate expectations of investors in respect of the service provided by fund managers. In summary:

  • The Central Bank requires all UCITS funds to consider the accuracy of their prospectus and KIID on an ongoing basis in light of the findings of its thematic review of closet indexing. Where such funds need to amend their prospectus or KIID on foot of this exercise, they must do so by 31 March 2020.
  • The letter sets out the Central Bank's expectations for
    • disclosures to investors
    • board governance and controls of offering documents
    • challenge of distribution and investment strategy
    • regular assessment of performance and whether fees are reasonable in the context of performance delivered 
    • new governance requirements for annual assessment of investment manager performance

See our Question of the Month for more details.

Register of Beneficial Ownership of Companies and Industrial and Provident Societies

The Companies Registration Office issued a newsletter confirming that: 

  • The Registrar of Companies has been appointed as the Registrar of Beneficial Ownership of Companies and Industrial & Provident Societies with effect from 29 July 2019.
  • The Register of Beneficial Ownership of Companies and Industrial & Provident Societies (RBO) will open to accept filings from Monday 29 July.
  • Filing of beneficial ownership data can only be made on-line through a portal on the RBO website. There are no paper forms and no filing fees involved.
  • The deadline for filing beneficial ownership information with the RBO for entities incorporated before 22 June 2019 is 22 November 2019. For any entity incorporated on or after 22 June 2019, the filing deadline is 5 months after the date of that entity's incorporation.
  • The RBO will write to each company and Industrial & Provident Society about their filing obligations.
  • The Irish Personal Public Service Number (PPSN) is to be submitted to facilitate verification of identity of beneficial owners. Details of the process to be followed for RBO filings in respect of beneficial owners who do not currently have an Irish Personal Public Service Number will be provided on 29 July.

The Social Welfare Consolidation Act 2005 (Specified Bodies) Regulations 2019 (SI 344 of 2019) will come into force on 29 July 2019. These Regulations provide that the Registrar of Beneficial Ownership of Companies and Industrial and Provident Societies (the Registrar) is a specified body for the purposes of section 262 of the Social Welfare Consolidation Act 2005. Accordingly:

  • the Registrar may use a person's public service identity number (PPSN) to verify a beneficial owner's identity
  • companies who seek to have the PPSNs of beneficial owners disclosed to them and who furnish the PPSNs to the Registrar will not be committing an offence under S.262 (9) of that act

Central Bank markets updates

The Central Bank published Issue 7 of 2019 of its Markets Update. Some key developments are set out below.

Central Bank

European Securities and Markets Authority (ESMA)

International Organization of Securities Commissions (IOSCO)

  • Basel Committee and IOSCO agree to one-year extension of the final implementation phase of the margin requirements for non-centrally cleared derivatives

The Central Bank of Ireland (Central Bank) published Issue 6 2019 of its Markets Update. Some key developments are set out below.

Central Bank

ESMA

IOSCO

For more information in relation to this topic please contact a member of the Asset Management & Investment Funds team.

Date published: 26 July 2019