Ireland: Investment Funds Newsletter, November 2015

The latest issue of the Central Bank of Ireland ("Central Bank") Markets Update covers a number of topics on the legal and regulatory agenda for asset management and investment funds. The Markets Update is published by the Central Bank to advise interested parties of recent policy developments related to the way the Central Bank supervises financial markets, investment funds and their service providers.

The most recent issue's primary purpose is to publish further guidance on a number of aspects of corporate governance for fund management companies previously considered in the Central Bank's Consultation on Management Company Effectiveness – Delegate Oversight ("CP86") and in its June 2015 feedback statement. For these purposes, fund management companies include UCITS management companies, alternative investment fund managers ("AIFMs"), self-managed UCITS investment companies and internally managed alternative investment funds.

We have summarised the matters covered in the Central Bank Markets Update below for you, together with additional updates on Irish and European developments which may be of interest. Our asset management partners are available to speak with you should you require any further detail in relation to these matters.

Central Bank Issues Guidance for Fund Management Companies

Included in its Market Update, on 4 November 2015, the Central Bank published a new document titled "Fund Management Companies – Guidance" ("Guidance Paper"), which includes newly finalised guidance on delegate oversight, together with the guidance on directors' time commitments and the organisational effectiveness role previously published in the CP86 feedback statement in June of this year. The Guidance Paper is accompanied by a feedback statement on the June 2015 consultation on the delegate oversight guidance. The Central Bank intends that all future fund management company guidance will ultimately be located in this Guidance Paper.

The following are the key dates by which action is required relating to the Guidance Paper:

Immediately: Fund management companies (including self-managed investment companies) must comply with the delegate oversight guidance.

1 January 2016: From this date, previously authorised management companies and investment funds with directors triggering the directors' time commitment risk indicator specified in the Guidance Paper will receive priority consideration for inclusion in Central Bank thematic reviews where board effectiveness is being assessed.

30 June 2016: According to the June 2015 CP86 feedback statement, existing management companies and self-managed investment companies are required to update business plans / programmes of activity to reflect the new organisational effectiveness role by this date. This transitional period is not provided for in the Guidance Paper or in the recently enacted Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015 (the "CB UCITS Regulations") and we are currently seeking clarification from the Central Bank as to whether this deadline still applies.

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Central Bank Publishes Updated AIF Rulebook

The Central Bank has published an updated version of its AIF Rulebook to reflect the outcome of CP86. In its June 2015 CP86 feedback statement, the Central Bank stated that it would proceed to streamline the existing managerial functions to be performed by UCITS management companies and AIFMs in the manner proposed in CP86, through the restructuring of the overall number of these to six functions, from nine and fifteen respectively. The six managerial functions will be investment management; fund risk management; operational risk management; distribution; regulatory compliance; and capital and financial management.

The organisational requirements for AIFMs in the AIF Rulebook have now been updated to reflect the six streamlined managerial functions. While the same person may perform more than one managerial function, a new rule provides that the same person must not perform managerial functions in relation to risk management and investment management.

The Central Bank will require existing fund management companies and self-managed investment companies to update their business plans / programmes of activity to reflect the revised managerial functions by 30 June 2016.

The latest version of the AIF Rulebook may be accessed here.

AIFMD: Central Bank Publishes Updated Q&A

The Central Bank has published a 17th edition of its AIFMD questions and answers document ("AIFMD Q&A"). The AIFMD Q&A has been amended to state that professional investor funds and qualifying investor alternative investment funds ("QIAIFs") can continue to be managed by non-EU AIFMs under the existing transitional arrangements until the European Commission makes a decision extending the AIFMD passport to non-EU AIFMs.

The AIFM Q&A has also been updated to state that there is no regulatory obstacle to subscription and redemption monies of individual sub-funds, as fund assets, being held within a single account in the name of the umbrella fund. The Central Bank has advised that, as this has not been prior practice in the context of Irish authorised investment funds, it is working on appropriate guidance which will be issued shortly.

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UCITS: Central Bank Publishes Updated Q&A

The Central Bank has published the ninth version of its UCITS questions and answers document ("UCITS Q&A") with the addition of eight new questions and one amended question. The new questions relate to the recently introduced CB UCITS Regulations, which came into effect on 1 November 2015.

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Updated Central Bank Prospectus Handbook

The Markets Update notes that the Central Bank's Prospectus Handbook has been updated, effective 2 November 2015. The Prospectus Handbook is relevant for issuers of transferable securities which are subject to the Prospectus Directive and certain law firms, listing agents, stockbrokers and investment banks who act as service providers to those issuers. The changes made are technical in nature and include amalgamating certain sections and correcting various typographical errors.

The latest version of the Prospectus Handbook may be accessed here.

Central Bank Publishes CP97 – Consultation on Investment Firm Regulations

The Central Bank has published CP97 – Consultation on Investment Firm Regulations which sets out the Central Bank's proposal to publish an Investment Firms rulebook which will consolidate into one document all of the conditions and requirements which the Central Bank imposes on investment firms. The Central Bank proposes to issue the rulebook in the form of Central Bank regulations under the Central Bank (Supervision and Enforcement) Act 2013. The proposed consolidated rulebook is referred to in the Consultation Paper as the "proposed Central Bank Investment Firm Regulations". This approach is consistent with the Central Bank's recent policy of placing former guidance on a statutory footing, as it has done in the case of the CB UCITS Regulations and has proposed to do in relation to the AIF Rulebook.

Responses to the consultation are requested by 27 January 2016. The consultation paper may be accessed here.

Finance Bill 2015 – Provisions Relevant to Investment Funds

The Finance Bill 2015 (the "Bill") was published on 22 October 2015. The Bill helpfully confirms an exemption from Irish income tax for travel and subsistence expenses reimbursed to non-executive directors who travel to Ireland to attend board meetings. It also extends the "investment management" exemption and amends the definition of "collective investment scheme", reflecting recent developments in the Irish funds industry. The Bill puts in place the necessary legislative framework for the implementation of the OECD's Common Reporting Standard in Ireland.

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PRIIPs: European Supervisory Authorities Consult on New KID

On 11 November 2015, the Joint Committee of the European Supervisory Authorities ("ESAs") – which include ESMA, the European Banking Authority and the European Insurance and Occupational Pensions Authority - launched a Joint Consultation Paper on PRIIPs Key Information Documents (the "Consultation Paper") to gather stakeholder views on proposed rules on the content and presentation of the Key Information Document ("KID") to be provided by packaged retail and insurance-based investment products ("PRIIPs"). The Consultation Paper follows two previous discussion papers issued by the ESAs and responses are requested by 29 January 2016. An extensive transitional period applies in relation to UCITS under the regulation introducing the KID and the Consultation Paper is therefore of more immediate significance to retail investor AIFs ("RIAIFs"), which will be required to provide a KID from 31 December 2016.

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European Parliament Adopts SFT Regulation

On 29 October 2015, the European Parliament adopted the proposed regulation on reporting and transparency of securities financing transactions ("SFT Regulation"). The regulation includes measures addressing: reporting of SFTs to trade repositories; reporting requirements for funds and requirements on counterparties engaged in rehypothecation. The Council of the EU is now in the process of formally adopting the SFT Regulation, and it will then be published in the Official Journal of the EU ("OJ"). The latest text of the SFT Regulation provides that it will enter into force on the twentieth day after its publication in the OJ and that it will apply from the date of entry into force, with important exceptions in respect of certain provisions.

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ELTIF Regulation to Enter into Force in December

The Regulation on European Long Term Investment Funds ("ELTIF Regulation"), which introduces a new long-term investment fund available to retail investors to the market, comes into force on 9 December 2015. ELTIFs are seen as a beneficial new regulated European fund brand investing in companies and projects that need long-term capital. ELTIFs are available for investment by retail and non-retail investors, and are permitted to operate a cross-border EU sales passport. As a regulation, its provisions are directly applicable across member states and therefore no national implementing measures are required. However, Irish regulations providing for certain matters arising from the application of the ELTIF Regulation are expected to be published in advance of 9 December 2015.

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Matheson in the News

Finally, we bring you a roundup of some of Matheson's high profile industry awards and activities in the last number of months, including an important appointment within the Asset Management Group.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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