1 Legal & Regulatory

1.1 UCITS Update

There have been a number of developments over the quarter:

Revised guidance on the use of financial indices

On 8 October 2018 the Central Bank of Ireland ("Central Bank") published updated guidance on the use of financial indices by UCITS. It clarifies its requirements and introduces a certification process regarding the use of financial indices by UCITS.

UCITS – review process

On 9 October 2018 the Central Bank advised of its updated review processes for UCITS and RIAIFs which simplify authorisation procedures and, in some cases, eliminate a review period of several weeks.

For more information see our client update, Improvements to Central Bank of Ireland Review Process for UCITS and RIAIFs

Central Bank Q&A

On 19 November 2018 the Central Bank published the 24th edition of the Central Bank's UCITS Q&A. One Q&A is updated and one added to address (i) the ability to establish unlisted share classes in an exchange traded fund or ETF; and (ii) the possibility of having different dealing cut-off times for hedged and unhedged share classes in an ETF.

Depositary safekeeping duties

Article 22a(3)(c) of the UCITS Directive 2009/65/EC requires that where a depositary delegates safe-keeping functions to third parties (custodians), the assets also need to be segregated at the level of the delegate. Delegated Regulation (EU) 2016/438 on safe keeping duties of depositaries details how this obligation is to be fulfilled.

On 19 November 2018 Delegated Regulation 2018/1619 amending Delegated Regulation (EU) 2016/438 on safekeeping duties of depositaries came into force. It will apply from 1 April 2020 and sets out further requirements where custody of UCITS clients' assets is delegated to a third party.

Closet indexing UCITS funds

On 4 December 2018 the Central Bank announced that it had begun analysis on 2000-plus Irish domiciled UCITS that report to be actively managed with supervisory follow-up where indications of 'closet indexing' are found. The objective of this review to ensure investors are not misled or misinformed about their investments in Irish domiciled funds.

1.2 AIFMD Update

There have been a few recent developments in relation to Directive 2011/61/EU ("AIFMD"):

ESMA Q&A

On 4 October 2018 the European Securities and Markets Authority ("ESMA") added a new Q&A clarifying the application of AIFMD notification requirements with regard to alternative investment fund managers ("AIFMs") managing umbrella alternative investment funds ("AIFs") on a cross-border basis. It confirms that an AIFM has to identify all the compartments of the umbrella AIF in the notification as well as the name and investment strategy of its compartments, to facilitate administrative procedure in home and host EU Member States. Any change in the composition of an umbrella AIF that is managed on a cross-border basis has to be notified to the competent authorities under Article 33(6) of AIFMD.

RIAIFs – review process

On 9 October 2018 the Central Bank updated its review processes for UCITS and RIAIFs which simplify authorisation procedures and, in some cases, eliminate a review period of several weeks.

For more information see our client update, Improvements to Central Bank of Ireland Review Process for UCITS and RIAIFs

Real asset depositaries

On 19 November 2018 the Central Bank published a notice of intention which sets out that it is minded to permit entities to seek authorisation under regulation 22(3)(b) of the European Union (Alternative Investment Fund Managers) Regulations 2013 (which transpose AIFMD into Irish law) to act as a depositary for specific types of AIFs which generally do not invest in assets that must be held in custody. It explains the Central Bank's proposed regulatory framework for these types of entities, providing stakeholders the opportunity to comment on them until 15 January 2019.

Depositary safekeeping duties

Delegated Regulation (EU) 231/2013 on safe keeping duties of depositaries supplements AIFMD and specifies depositaries' duties on the safe keeping of alternative investment fund ("AIF") clients' assets. On 19 November 2018 Delegated Regulation 2018/1618 amending Delegated Regulation (EU) 231/2013 on safekeeping duties of depositaries came into force. It will apply from 1 April 2020 and sets out further requirements where custody of AIF clients' assets is delegated to a third party.

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