Ireland: The International Comparative Legal Guide To: Alternative Investment Funds 2016

Last Updated: 10 June 2016
Article by Brian Kelliher and Sean Murray

Most Read Contributor in Ireland, July 2017

1 Regulatory Framework

1.1 What legislation governs the establishment and operation of Alternative Investment Funds?

Where an AIF is a collective investment scheme authorised and supervised by the Central Bank of Ireland (the "Central Bank"), Irish legislation that governs the establishment and operation of the collective investment scheme applies, as further detailed in question 1.3.

However, all Irish AIFs are impacted operationally by:

  • the European Communities (Alternative Investment Fund Managers) Regulations 2013 (S.I. 257 of 2013) (the "Irish AIFM Regulations") which transposed Directive 2011/61/ EU (the "AIFM Directive") into Irish law; and
  • Commission Delegated Regulations and Commission Implementing Regulations adopted by the EU Commission in specified areas in order to ensure that the AIFM Directive is implemented consistently across the EU, the principal one of which is the Commission Delegated Regulation (EU) No 231/2013 supplementing the AIFM Directive with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision (the "Commission Delegated Regulation").

1.2 Are managers or advisers to Alternative Investment Funds required to be licensed, authorised or regulated by a regulatory body?

AIFMs

Unless availing of transitional arrangements under Article 61 of the AIFM Directive that have been extended, or unless exempt from authorisation pursuant to Article 3 of the AIFM Directive:

  • Irish AIFMs managing Irish AIFs are required to be authorised under the Irish AIFM Regulations; and
  • non-Irish EU AIFMs managing Irish AIFs are required to be authorised in their home jurisdiction and to have availed of the passporting provisions pursuant to Article 33 of the AIFM Directive.

Although a non-EU AIFM currently has no passporting rights, a non-EU AIFM may avail of transition benefits allowed by the Central Bank for such entities (until such time as passporting rights are extended to non-EU AIFMs by the European Commission) and manage an Irish AIF constituting a collective investment scheme authorised and supervised by the Central Bank and marketed to qualifying investors (a "QIAIF") provided it is designated by the QIAIF as the AIFM. Such transition benefits will vary depending on when the QIAIF was authorised by the Central Bank. However, in such circumstances the non-EU AIFM must be approved by the Central Bank to act as an investment manager of Irish authorised collective investment schemes (see below).

An Irish AIF constituting a collective investment scheme authorised and supervised by the Central Bank and marketed to retail investors (a "RIAIF") must have an authorised AIFM. Consequently a non- EU AIFM cannot avail itself of the transition benefits allowed by the Central Bank as referred to above and manage a RIAIF on the basis it is designated by the RIAIF as the non-EU AIFM.

Non-AIFM Irish Management Companies/General Partners

RIAIFs and QIAIFs, depending on their legal form, may be required to appoint a management company/general partner to carry out the management of those AIFs. Where such a management company/ general partner is not the AIFM, it must be approved by the Central Bank and meet the requirements relating to such entities as set out in the Central Bank's AIF Rulebook (the "AIF Rulebook"), e.g.:

  • a minimum capital requirement of at least EUR 125,000 or one quarter of its total expenditure taken from the most recent audited accounts (whichever is higher);
  • organisational requirements such as the appointment of a compliance officer who must be located in the State, policies and systems to identify, control and monitor risk, accounting policies and procedures, maintenance of records, etc.; and
  • adequate management resources.

Investment Managers

Investment managers or sub-investment managers which are one of the following entities will not usually be subject to an additional regulatory review process by the Central Bank:

  • UCITS management companies;
  • MiFID investment firms;
  • EU credit institutions; and
  • externally appointed AIFMs.

Investment managers which are not one of the entities listed above may only be appointed where (i) a Memorandum of Understanding ("MoU") is in place between the Central Bank and the competent authority in the home jurisdiction of the investment manager, and (ii) the Central Bank has approved the investment manager following receipt of a completed Investment Manager Clearance Form.

Investment Advisors

The Central Bank does not apply an approval process to investment advisors in order for such entities to provide investment advice in relation to a RIAIF/QIAIF, provided that the manager/directors of the RIAIF/QIAIF confirm that the advisors in question will act in an advisory capacity only and will have no discretionary powers over any of the assets of the RIAIF/QIAIF.

1.3 Are Alternative Investment Funds themselves required to be licensed, authorised or regulated by a regulatory body?

RIAIFs/QIAIFs (depending on the legal form) are authorised by the Central Bank under the following Irish legislation as amended from time to time:

  1. unit trusts under the Unit Trusts Act 1990;
  2. investment companies under Part 24 of the Companies Act 2014;
  3. investment limited partnerships ("ILPs") under the Investment Limited Partnerships Act 1994;
  4. common contractual funds ("CCFs") under the Investment Funds, Companies and Miscellaneous Provisions Act 2005; And
  5. Irish collective asset-management vehicles ("ICAVs") under the Irish Collective Asset-management Vehicles Act 2015.

(Collectively referred to as the "Irish Funds Legislation".)

Under the Irish Funds Legislation, the Central Bank is responsible for the authorisation and supervision of these AIFs and has the power to impose conditions on them. The current conditions which the Central Bank imposes are contained in the AIF Rulebook.

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Previously published by Global Legal Group

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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