On 5 October 2015, the Central Bank published:

  • a feedback statement on its consultation paper CP 84;
  • an updated AIFMD Q&A; and
  • a new Q&A on the Investor Money Regulations.

The purpose of this briefing is to summarise the main details of each of these publications.


In July 2014 the Central Bank published its consultation paper CP 84 relating to the adoption of ESMA's revised Guidelines on ETFs and other UCITS issues. The consultation focused on the ability in the revised ESMA Guidelines for all UCITS to derogate from the 20% diversification requirement for collateral, where the collateral consists of securities issued or guaranteed by an EU member state ("Member State") or one or more of its local authorities, a non-EU country or a public international body to which one or more Member States belong (each, a "State Issuer").

The Central Bank raised concerns in its consultation about whether all UCITS should be able to derogate from the collateral diversification requirement where collateral consisted of securities issued or guaranteed by a State Issuer. In its consultation paper the Central Bank stated that there were strong grounds for limiting the derogation set out in the ESMA Guidelines to UCITS money market funds only. In the context of the issue of the new UCITS Rulebook (which is to take effect on 1 November 2015), the Central Bank has now reached a conclusion on this issue which is addressed in its feedback statement on CP 84. The Central Bank is to implement ESMA's Guidelines in a modified manner to address its concerns.

The conditions for collateral received by a UCITS are now contained in Schedule 3 to the new UCITS Rulebook. The Central Bank will require that the threshold applied by a UCITS in its credit assessment of collateral issuers is the standard which applies to investments by a UCITS money market fund. Where collateral issued or guaranteed by a single State Issuer results in exposure of the UCITS to that State Issuer of more than 20% of NAV the securities must be from at least six different issues and the securities from any single issue must not account for more than 30% of NAV. Where a UCITS intends to be fully collateralised in securities issued or guaranteed by a State Issuer this must be disclosed in the UCITS prospectus.

Where collateral results in exposure to any State Issuer of more than 20% of NAV, the identity of the State Issuer must be included in the prospectus. The Central Bank refers to the need for additional resources to be employed by a UCITS in order for the UCITS to carry out a more detailed credit assessment of the quality of the collateral.

The Central Bank considers that its concerns about how a UCITS would manage deteriorating credit quality in stressed market conditions can be addressed by imposing rules on how collateral is determined to be of "high quality". To this end, a UCITS must ensure that:

  • where the issuer is subject to a credit rating by an agency registered or supervised by ESMA, that rating is taken into account by the UCITS in the credit assessment process; and
  • where an issuer is downgraded below the two highest short-term credit ratings by such a credit rating agency, this must result in a new credit assessment being conducted by the UCITS without delay.

The new guidance also sets out the Central Bank's expectations about the action a UCITS should take where it is holding collateral of deteriorating quality and refers to the need for a plan to be put in place to remedy the exposure to such collateral. Where a specific credit quality threshold is breached a new credit assessment must be conducted.


The Central Bank has issued an updated version of the AIFMD Q&A. This updated version clarifies that, following on from the Central Bank's feedback statement to CP 86, only newly authorised AIFMs are subject to the authorisation process which requires the rationale for the board composition to be documented in the programme of activities. However, the Central Bank is of the view that it is "good practice" for the director performing the organisational effectiveness role for each authorised AIFM (new or existing) to document the rationale for the board composition and to include this in the programme of activities when it is next updated.


The Central Bank has issued an Investor Money Regulations Q&A for the first time. This Q&A is to be read in conjunction with the Investor Money Regulations and the Central Bank's Guidance on Investor Money Regulations for funds service providers. The Q&A deals with general queries likely to arise in relation to the implementation of the Investor Money Regulations on 1 April 2016.

The first set of questions and answers are general in nature and include guidance such as:

  • it is the responsibility of the Client Assets Specialist Team in the Securities and Markets Supervision Division of the Central Bank to supervise fund service provider arrangements to comply with the Investor Money Regulations;
  • fund service providers holding investor money in limited or exceptional circumstances must still comply with the Investor Money Regulations; and
  • the Investor Money Regulations apply to fund service providers that provide services to non-EU AIFs as well as UCITS and AIFs.

The second set of questions deal with issues around the segregation of collection accounts. It confirms, for example, that retrocessions and rebates to which an investor is beneficially entitled must be treated as investor money.

The other questions and answers relate to risk management queries and audit requirements. The Head of Investor Money Oversight must be a position held within the fund service provider and it is the responsibility of the fund service provider to assess the independence of the proposed Head of Investor Money Oversight and ensure that the person is free from conflicts of interest in that role. The Q&A confirms that the Central Bank does not intend to issue a template investor money management plan and that this should be prepared by the fund service provider and tailored to the fund service provider's business. The Q&A also confirms that a separate report must be submitted to the Central Bank by an auditor in relation to the need to provide the Investor Money Examination and it is a matter for each auditor to satisfy itself that it has carried out the assurance work necessary to provide the report.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.