Asset Management & Investment Funds: Irish Practice Developments - May 2021

31 December 2021 deadline for UCITS Liquidity Risk Management review.

The Central Bank of Ireland (CBI) wrote to all Irish authorised UCITS managers about liquidity risk management (LRM). The CBI has emphasised how seriously it takes the findings of the Common Supervisory Action (CSA) on LRM, which was co-ordinated by the European Securities and Markets Authority (ESMA).

All Irish authorised UCITS managers (ManCos, which include self - managed UCITS) are required to conduct a specific review of their practices, documentation, systems and controls. This review must be documented and must include details of actions taken to address any of the findings in the ESMA public statement on the CSA and the CBI's letter.

This review has to be completed and an action plan discussed and approved by the board of each ManCo by the end of Q4 2021. 

The CBI highlights the following specific items for attention and has set out detailed analysis of each topic in the Appendix to the letter. 

  • instances of LRM frameworks that were not clearly defined, adaptable and/or independent
  • a lack of formal documented pre-investment forecasting frameworks 
  • a lack of formal liquidity escalation policies
  • cases where no pre-investment forecasting was performed
  • over-reliance on the presumption of ongoing liquidity
  • oversight of delegates below expectations
  • shortcomings in the role of the designated person for fund risk management 
  • cases of no liquidity reporting to the board of the UCITS manager
  • shortcomings in internal control framework

The CBI has highlighted the areas of concern in each area, which will be helpful to each ManCo in identifying any areas of improvement needed in its own liquidity risk management framework.

The boards of externally managed UCITS should engage with their appointed ManCo to understand the steps it is taking to analyse its liquidity risk management framework and any improvements proposed following such a review.

Our Asset Management & Investment Funds team has been closely engaged with assisting clients on liquidity management generally and on responses to the CSA. Please speak with any member of our Asset Management & Investment Funds team for further information on this topic.

Speech by Derville Rowland, CBI Director General (Financial Conduct) at the Irish Funds conference 2021

Derville Rowland, CBI Director General (Financial Conduct), spoke at the Irish Funds Global Funds conference on 19 May 2021. Points to note include:

  • October 2022 is the expected application date for sustainability-related amendments to the UCITS Directive and AIFMD
  • the resilience of the funds industry through COVID disruption and lessons learned
  • money market funds and liquidity management practices are under the spotlight
  • macroprudential framework review for investment funds is a priority
  • diversity in PCF functions is under scrutiny
  • ESG is a strategic priority
  • CBI stakeholder engagement review is in hand

CBI Director General (Financial Conduct), Derville Rowland, will chair ESMA's Investment Management Standing Committee

ESMA's Board of Supervisors published a statement on the appointment of Derville Rowland, CBI Director General (Financial Conduct), as the new chair of its Investment Management Standing Committee (IMSC).

Ms Rowland will begin her two-year term on 1 July 2021. The standing committees are expert groups drawn from ESMA staff and Member States’ national competent authorities for securities markets regulation and are responsible for the development of policy in their respective areas. The mandate of the IMSC includes work on issues relating to collective investment management, covering both harmonised and non-harmonised investment funds. It also develops technical standards, advice to the EC, and guidelines and recommendations relating to UCITS and AIFMD.

Updates to the Companies Act 2014 for virtual general meetings

The Companies (Miscellaneous Provisions) (Covid-19) Act 2020 introduced temporary amendments to the Companies Act 2014  to address issues arising as a result of COVID-19, including:

  • execution of documents by counterpart
  • general meetings conducted wholly or partly by electronic means
  • voting on resolutions at general meeting, including where technology is used

Initially, the amendments were to last for an "interim period," which was originally set to expire on 31 December 2020. This was extended to 9 June 2021 and has now been further extended to 31 December 2021.

The General Scheme of the Companies (Small Company Administrative Rescue Process and Miscellaneous Provisions) Bill 2021 proposes (at head 69) to make permanent provision for virtual general meetings. This is part of the modernisation of the Companies Act and will ensure that company general meetings can be facilitated virtually on a permanent basis.

For more information please contact a member of the Asset Management & Investment Funds team.

Date published: 28 May 2021