Deadlines
- 7 August 2024 - UCITS eligible assets - ESMA published a call for evidence on the review of the UCITS Eligible Assets Directive (discussed here) with responses required by 7 August 2024.
- 3 September 2024 - ESMA/ EBA discussion paper on investment firms’ prudential framework (includes consideration of UCITS ManCos and AIFMs) - ESMA/EBA’s discussion paper on the potential review of the investment firm prudential framework, in response to a European Commission call for advice, is open for response until 3 September 2024.
- 8 October 2024 - Liquidity management tools for funds - ESMA’s consultation on liquidity management tools for funds is open for response until 8 October 2024.
The above list does not cover:
- tax, FATCA or CRS filings, director's compliance statement obligations, which apply to listed UCITS VCCs
- diversity reporting obligations, which may apply to listed AIF and UCITS VCCs
- ad hoc filings, such as regulatory reports, or filings of annual accounts (and related documents which include annual FDI returns) and semi-annual accounts or other similar returns (which deadlines vary to reflect the particular entity's year-end)
By way of example, the Companies (Accounting) Act 2017 obliges UCITS investment companies and AIF investment companies to file annual accounts with the CRO within eleven months of their financial year-end.
Independent review of the CBI’s Fitness and Probity regime
The Central Bank of Ireland (CBI) published the independent review of its Fitness and Probity (F&P) regime. The review was undertaken by Mr Andrea Enria, the former Chair of the ECB Supervisory Board. The review concludes that the conduct of the F&P regime at the CBI is broadly in line with peer regulators in different jurisdictions.
The review proposes a number of targeted improvements which the CBI plan to implement by the end of the year. We can therefore expect the CBI to significantly enhance the F&P regime, including the following.
- Clarify CBI expectations as regards the process (which should be proportionate) that a regulated financial service provider (RFSP) engages in prior to submitting an application for a PCF approval to the CBI.
- Consolidate F&P standards in a single location.
- Enhance the F&P standards.
- Incorporate more objective measures, such as specific qualifications, certifications or experience requirements to reduce subjectivity in the assessment process.
- Outline clear expectations for the number of mandates that an individual can hold. Such expectations should not operate to preclude the possibility of holding a mandate above the CBI’s expressed expectations. A more detailed level of information, assessment and consideration will be expected of the proposing RFSP and the application will receive a heightened level of scrutiny by the CBI involving a more thorough examination of the individual’s time commitments.
- Develop specific guidance on the role of an executive, non-executive and on the specific expectations for independent directors.
- Include provisions on identifying, managing and mitigating conflicts of interest.
- Clarify how collective suitability and diversity within boards and management teams will be assessed.
- Clarify the approach to be adopted in relation to considering past events.
- Review materials on corporate governance, the F&P regime and the IAF to ensure that they operate in an integrated manner.
- Improve CBI governance.
- Establish the F&P gatekeeping unit.
- Enhance implementation of a risk-based approach for F&P gatekeeping, with a reconsideration of the overall number of PCF roles and a possible adjustment in the approach to different sectors including to the funds sector, which is the largest contributor in terms of applications. Whilst recognising the reduced role of fund directors in risk management decisions, which are generally the responsibility of the asset manager, in light of the increased size and systemic footprint of the sector in Ireland and the widespread practice of multiple directorships, it could be appropriate to increase the number of interviews held in the sector with a view to ensuring some form of F&P scrutiny, also on time commitment, on individuals cumulating a larger number of roles and to de-stigmatise the fact of being called for interviews. The interviews would be subject to the enhanced self-discipline on timelines, which are particularly relevant for a timely launch of funds. In considering the number of PCF roles, the F&P regime can better differentiate the expectations of the roles and responsibilities for different PCF roles, recognising the different relevance from a prudential perspective.
- Enhance the interview process.
- Giving a minimum of five day’s notice of interview.
- Setting a limit for the duration of the interview (possibly 90 minutes).
- The setting should remain conversational, rather than adversarial.
- The interviewee may bring a note keeper or a lawyer as observer.
- The minutes of the interview should be shared with the interviewee within one week, allowing one week for providing comments.
- Feedback should be provided to the individual and the RFSP.
Other recommendations concern CBI decision making, communications (including an annual information session for firms and potential candidates and workshops to obtain feedback), withdrawals/ feedback, management information, quality assurance, a complaints procedure and training.
You can read more here.
CBI Authorisations and Gatekeeping Report
The CBI issued its first "Authorisations and Gatekeeping Report", Edition 1. The report will be of practical assistance to applicant firms navigating the authorisation process. The report sets out CBI’s expectations and recommendations including its experience of authorisation timeline influencers. The report:
- Sets out how the CBI will discharge and continue to refine its authorisation mandate.
- Explains the authorisation framework, CBI risk appetite and priorities.
- Clarifies factors which affect the timeline to authorisation which include:
- complexity of the proposed business model
- quality of the application submission
- timeliness of response to CBI queries
- early engagement with CBI
- that firms have fully considered their regulatory obligations in their applications
- that applications are tailored to the authorisation sought, the applicant firm’s business model, enterprise risks and risk frameworks
- Explains CBI expectations of/recommendations to applicant firms which include:
- awareness of regulatory obligations
- planning and organisation to ensure ongoing compliance with current regulations and guidance and upcoming rule changes
- understanding of business model risks and mitigants
- Details common challenges experienced by firms seeking authorisation which include:
- unclear business models and underlying assumptions
- delays in responding to CBI queries
- governance (lack of substantive presence and adequate staffing in jurisdiction - PCF and non-PCF)
- inadequate preparation and incomplete applications
- CBI expects local risk frameworks which are tailored to the applicant firm, rather than over-reliance on group risk frameworks
The report provides data on the authorisations landscape and gives an overview of F&P applications and timelines.
The CBI points out that it has identified the value of active and constructive engagement with both industry and other stakeholders. It points to a step change in the CBI’s external engagement with industry and stakeholders in relation to the authorisation process.
CBI feedback to its discussion paper on macroprudential policy for investment funds
The CBI published a feedback statement to its discussion paper on an approach to macroprudential policy for investment funds.
The feedback statement summarises:
- feedback received and the CBI’s perspective on the key themes raised by respondents
- key themes from the CBI’s May 2024 conference on macroprudential policy for investment funds
- summary of bilateral stakeholder engagement on an overarching macroprudential framework for investment funds
Next steps for progressing this policy agenda will take place in co-ordination with international counterparts. Progress will proceed at different speeds and will require different forms of engagement, including with a range of international and domestic stakeholders, depending on the issue being addressed. As such, and in line with the principle that a ‘one-size-fits-all’ approach to the funds sector is not appropriate, progress in developing and operationalising the macroprudential lens in the oversight of the funds sector will occur across a number of different dimensions over the coming years. CBI areas of focus are set out below.
- CBI is contributing to ongoing work at the Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO) to strengthen resilience of non-bank financial institutions (NBFI).
- In order to support international work led by the FSB and IOSCO on liquidity risk management in open-ended funds (OEFs), the CBI is undertaking work domestically to understand better how price-based liquidity management tools (LMTs) are used by Irish-domiciled funds, as well as exploring in more depth some of the key implementation challenges, including on issues such as incorporating the market impact of asset sales into swing factors; understanding any inconsistencies in the use of these tools; and understanding the use of such tools in normal as well as stressed conditions.
- The CBI is also participating in international workstreams on NBFI (including funds) leverage.
- CBI will contribute to the European Commission’s consultation on a macroprudential framework for non-bank financial intermediation.
- CBI will focus on the implementation of the recently updated FSB recommendations on OEFs in Europe and the FSB’s ongoing work on addressing vulnerabilities from non-bank leverage.
- CBI will continue to evaluate the implementation of the two macroprudential measures already introduced, for Irish authorised property funds and Irish authorised GBP-denominated LDI funds.
- CBI will continue to actively monitor the sector for evolving financial vulnerabilities and to deepen its understanding of the nature and magnitude of systemic risk across different fund cohorts, through ongoing analysis and research.
CBI press release is here.
CBI Q&As on the Individual Accountability Framework
The CBI published answers to questions about the Individual Accountability Framework (IAF) asked by stakeholders (Q&A). The answers are to be read with other CBI publications, including the Guidance on the IAF, Administrative Sanctions Procedure Guidelines and the Fitness and Probity regime. The questions and answers will be integrated into the IAF guidance when it is updated.
Key takeaways:
- Controlled function (CF) role holders providing incoming services on a freedom of services basis are subject to the Conduct Standards.
- In the main, individuals in group entities will not ordinarily exercise significant influence on the conduct of subsidiary/related RFSP's affairs and as such constitute CF1s (therefore not subject to the Additional Conduct Standards - as well as the Common Conduct Standards). However, where the individual can directly/exercise a significant influence on key aspects of the business of the RFSP, they will be a CF1 and therefore subject to both the Common Conduct Standards and the Additional Conduct Standards.
- Where CF and/or pre-approval controlled function (PCF) roles are outsourced, the delivery of training to individuals in CF roles on the Common Conduct Standards and to individuals in PCF/CF-1 roles on the Additional Conduct Standards can be facilitated by a third party.
CBI speech on regulatory change - Patricia Dunne, CBI Director of Securities and Markets Supervision
Patricia Dunne, CBI Director of Securities and Markets Supervision delivered a speech on regulatory change. Items discussed included the below.
Loan origination - CBI is working with industry on the new AIFMD provisions on loan-originating funds. The CBI intends to align its rules on loan origination with those proposed under AIFMD II. This will result in significant changes to CBI’s existing rules - including removing the “single purpose rule” requirement and mixed strategy funds will be able to originate loans for the first time. Furthermore, funds which originate loans will be available both to retail and professional investors. A formal consultation on the CBI framework for loan originating funds is expected in Q4 2024.
Regulatory reporting and LMTs - in terms of implementing AIFMD II and its updates to the UCITS Directive (including enhanced reporting for AIFMs and UCITS management companies and a harmonised set of liquidity management tools (LMTs), the CBI hopes that because its rules already provide for a full suite of LMTs as well as there being familiarity with AIFMD Annex IV reporting, that the work to be done is more an adaptation of existing requirements.
Liquidity management - a public consultation on CBI’s regulatory requirements is planned for later in 2024.
Delegation of portfolio and risk management - this will require extensive reporting, both at authorisation and on an ongoing basis. Ms Dunne noted that the CBI is currently undertaking thematic work in this area.
CBI is heavily involved in ESMA workstreams in developing level 2 measures and is considering changes to its regulatory rules to reflect the enhancements made and any consequential changes.
CBI speech on implementing DORA (operational resilience) - remarks by Director Gerry Cross
CBI Director Gerry Cross delivered a speech on the theme of implementing the Digital Operations Resilience Act (DORA) which will apply from 17 January 2025. Gerry Cross is also Chair of the European Supervisory Authorities sub-committee on Digital Operational Resilience. DORA includes a regulation and a directive on digital operational resilience in the financial sector. It requires a wide range of financial entities to manage their information and communication technology (ICT) in a robust and effective way.
For more information on these topics please contact any member of A&L Goodbody's Asset Management & Investment Funds team.
