The Front Page, Asset Management & Investment Funds: Irish Practice Developments

Some Approaching Deadlines

27 September 2017. Consultation Paper CP 111 Consultation on Second Edition of the Central Bank Investment Firms Regulations including changes related to MiFID II (see below).

Central Bank UCITS Regulations, UCITS Q&A and Guidance

The Central Bank of Ireland (Central Bank) signed the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) (Amendment) Regulations 2017, S.I. No. 344 of 2017, (the Central Bank UCITS (Amendment) Regulations 2017) on 27 July 2017 and these amending regulations are now in force. The Central Bank subsequently published Issue 6 of its Markets Update on 4 August 2017 with an updated UCITS Q&A and updated Guidance on UCITS Financial Derivative Instruments and Efficient Portfolio Management.

While the Central Bank UCITS (Amendment) Regulations 2017 set out consequential amendments following the implementation of UCITS V, as well as some technical changes, they are of particular value in clarifying some of the requirements which derive from CP86. CP 86 is relevant for UCITS management companies, Self-managed UCITS investment companies/ICAVs, Authorised AIFMs, and internally managed AIF investment companies/ICAVs.

Changes

  • Location Rule. The location rule (as now enshrined in law by virtue of Regulation 15 of the Central Bank UCITS (Amendment) Regulations 2017) has been changed to expand the requirements for residency in the EEA to include "or such other country as the Bank may, taking into account criteria regarding effective supervision, determine". The Central Bank will thus have more flexibility to determine that countries which are outside the EEA meet the necessary requirements. This flexibility is very welcome.
     
  • Central Bank UCITS Q&A - nineteenth edition. New Q&A 1079 - 1083 relate to the Central Bank UCITS (Amendment) Regulations 2017 and concern; initial capital requirement for depositary; how one computes half of a board of directors where the number of directors is uneven; meaning of reverse leverage; and where cash booked in accounts and held as ancillary liquidity may be held. Q&A 1084 relates to the governing law of management company agreements.
  • Anti-dilution levy. Flexibility to include the preservation of the net asset value per share of the UCITS has been included by virtue of Regulation 3 of the Central Bank UCITS (Amendment) Regulations 2017.
     
  • Subsidiaries. The conditions which must be satisfied by a UCITS when establishing a subsidiary are enshrined in law by virtue of Regulation 5 of the Central Bank UCITS (Amendment) Regulations 2017.
     
  • Prospectus Disclosure of Long/ Short positions. More flexibility regarding prospectus disclosure of long /short positions is now possible by virtue of Regulation 11 of the Central Bank UCITS (Amendment) Regulations 2017.
     
  • Depositary Requirements. Rules on depositaries are revised by virtue of Regulations 17 to 23 and 30 of the Central Bank UCITS (Amendment) Regulations 2017.
     
  • Disclosure of open FDI positions in a UCITS' annual and half-yearly report. Flexibility to disclose on a condensed basis is permitted where the volume of these positions is high by virtue of Regulation 28 of the Central Bank UCITS (Amendment) Regulations 2017. The Central Bank has updated its Guidance on UCITS Financial Derivative Instruments and Efficient Portfolio Management to include (page 32) an additional provision on disclosure requirements for FDI in periodic reports.  
     
  • Disclosure regarding deduction of EPM fees and expenses from revenue. Flexibility to disclose in a UCITS prospectus or annual report is permitted by virtue of Regulation 9 of the Central Bank UCITS (Amendment) Regulations 2017.
     
  • Central Bank UCITS Q&A- nineteenth edition.  New Q&A 1079 - 1083 relates to the Central Bank UCITS (Amendment) Regulations 2017 and concern; initial capital requirement for depositary; how one computes half of a board of directors where the number of directors is uneven; meaning of reverse leverage; and where cash booked in accounts and held as ancillary liquidity may be held. Q&A 1084 relates to the governing law of management company agreements.

The changes are discussed in more detail in our newsalert; Central Bank UCITS Regulations clarify CP86 location rules and other matters. 

Central Bank Markets Update

The Central Bank published Issue 6 of its Markets Update on 4 August 2017 which included:

MiFID II Regulations

The European Union (Markets in Financial Instruments) Regulations 2017 (S.I. No. 375 of 2017) (MiFID II Regulations) were signed into law by the Minister for Finance on 10 August 2017 and published by the Department of Finance on 15 August 2017. The MiFID II Regulations transpose MiFID II into Irish law and they will enter into effect on 3 January 2018. Some of the key impacts of the MiFID II Regulations are discussed here including the "Safe Harbour" Exemption, National Discretions, the Optional Exemption pursuant to Article 3(1) of MiFID II and the Single Investment Firms Rulebook Approach. In the context of the Single Investment Firms Rulebook Approach, the Central Bank has launched a consultation proposing to amend the Central Bank Investment Firm Regulations (S.I. No 60 of 2017) (Investment Firms Regulations) and the Client Asset Regulations as necessitated by MiFID II. The consultation also proposes integrating the Client Asset Regulations and the Investor Money Regulations into the Investment Firms Regulations in order to create a "single investment firms rulebook approach". The consultation closes 27 September 2017.

GDPR - Guidance on appropriate qualifications for a Data Protection Officer. 

The Data Protection Commissioner issued guidance on qualifications for a Data Protection Officer on 14 August 2017. 

Irish Funds Guidance Paper 6 on Connected Party Transactions and Annual UCITS Depositary Report

The Irish Funds Depositary Working Group updated the Irish Funds Guidance Paper 6 on Connected Party Transactions which is relevant to the following two categories of transactions.

a) Transactions with parties connected to the Depositary including its affiliated entities and, for UCITS, its affiliated delegates.

b) Transactions with parties connected to the promoter, manager, investment adviser and affiliated entities (or, for a UCITS, the delegates of the fund / manager).

The Irish Funds Depositary Working Group has also created a template of a UCITS Depositary Report to shareholders.

Please speak with your usual contact on the A&L Goodbody Asset Management & Investment Funds team if you wish to see a copy of the documents. 

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

Date published: 05 September 2017