Ireland: Funds Quarterly Update | January - March 2017

1 LEGAL & REGULATORY

1.1 UCITS Update

There have been a number of developments over the quarter:

Central Bank UCITS Regulations – CP105

On 19 January 2017 the Central Bank of Ireland ("Central Bank") issued a Feedback Statement on CP105 - Consultation on amendments to the Central Bank UCITS Regulations. This summarises the responses received along with the Central Bank's comments and indicates that amending regulations are expected to issue "in Quarter 1 2017".

UCITS Share Classes – ESMA Opinion

The European Securities and Markets Authority ("ESMA") issued an opinion on share classes in UCITS on 30 January 2017 (ESMA34-43-296). It outlines four principles that should be adhered to when operating multiple share classes in UCITS as follows:

  • Common investment objective. Share classes of the same fund should have a common investment objective reflected by a common pool of assets. ESMA considers that hedging arrangements at share class level (with the exception of currency risk hedging) are not compatible with the requirement for a fund to have a common investment objective.
  • Non-contagion. UCITS management companies should implement appropriate procedures to minimise the risk that features specific to one share class could have a potentially adverse impact on other share classes of the same fund.
  • Pre-determination. All features of the share class should be pre-determined before the fund is set up.
  • Transparency. Differences between share classes of the same fund should be disclosed to investors when they have a choice between two or more classes.

It also provides that share classes should not be set up to circumvent the UCITS Directive rules, particularly those on diversification, derivative eligibility and liquidity. Any non-conforming share classes have to be closed to new investors within six months of the publication of the opinion (that is, 30 July 2017) and closed to investments from existing investors within 18 months of the publication of the opinion (that is, 30 July 2018).

In summary, ESMA endorses the utilisation of share classes and the application of features and techniques at share class level but prohibits any share class hedging techniques with the exception of currency hedging. This will effectively terminate practices such as interest rate hedging and volatility hedging at share class level in UCITS.

The opinion also presents a number of points to be clarified. To this end, the Irish Funds' UCITS Rulebook Working Group has engaged with the Central Bank and it has indicated that it will shortly be amending the UCITS rules to implement the requirements in the opinion and update its UCITS Q&A.

Central Bank Q&A

On 13 March 2017 the Central Bank published the 16th edition of its UCITS Q&A. Existing question, ID 1056 - Central Bank (UCITS) Regulations - Transitional arrangements, is amended as a consequence of the publication of the Central Bank (Supervision and Enforcement Act) 2013 (Section 48(1))(Investment Firms) Regulations 2017 stating that fund administrators are now subject to Parts 2-5 of those Regulations (see 1.6 below "Outsourcing of Fund Administration Activities").

1.2 AIFMD Update

There have been a number of developments in relation to the Directive 2011/61/EU ("AIFMD") over this quarter:

AIF Rulebook

On 2 December 2016 the Central Bank published a notice of intention to increase the range of investments an Irish authorised loan originating QIAIFs ("LQIAIFs") may make from 3 January 2017. On this date the Central Bank published another version of its AIF Rulebook which extends the scope of permitted activity for LQIAIFs. On 13 March 2017 the Central Bank published a further version of the AIF Rulebook.

Central Bank Q&As

On 3 January 2017 the Central Bank published the 23rd edition of its AIFMD Q&A. New questions are added on loan originating QIAIFs which clarify the scope of the extension of permitted activity.

On 13 March 2017 the Central Bank published its 24th edition with amendments made to ID 1021, Depositary Services. This amendment was made as a consequence of the publication of the Central Bank (Supervision and Enforcement Act) 2013 (Section 48(1))(Investment Firms) Regulations 2017 (see 1.6 below re "Outsourcing of Fund Administration Activities"). ID 1021 clarifies that entities authorised under the Investment Intermediaries Act 1995 may be appointed by an alternative investment fund manager ("AIFM") to provide certain services without prior authorisation.

1.3 EMIR Update

The European Market Infrastructure Regulation (Regulation on over the counter ("OTC") derivative transactions, central counterparties ("CCPs") and trade repositories (Regulation 648/2012)) ("EMIR") is relevant to all Irish funds trading in financial derivative instruments ("FDI") whether on an exchange or otherwise. UCITS and AIFs are financial counterparties for EMIR purposes, subject to the full scope of EMIR obligations.

There have been a number of developments over the quarter:

Two regulations came into force on 10 February 2017 amending and supplementing the data reporting requirements under Article 9 of EMIR (Commission Delegated Regulations (EU) 2017/104 and 2017/105). The updates include clarifications around collateral reporting and an extension of the deadline for backfilling legacy trades (i.e. trades still open on 16 August 2012, or entered into thereafter but expired prior to the commencement of reporting on 12 February 2014) to 12 February 2019. They both apply from 1 November 2017 (with the exception of the extension of the deadline for reporting legacy trades, which took effect immediately). On 2 February 2017 ESMA published an updated EMIR Q&A clarifying that reporting entities are not obliged to update all outstanding trade reports on the application date of the revised standards and are required to submit the reports related to the old outstanding trades only when a reportable event takes place (for example, when the trade is modified). It also explains how those reports will be validated by the trade repositories.

On 23 February 2017 the Joint Committee of the European Supervisory Authorities ("ESAs") (the European Banking Authority ("EBA"), ESMA and EIOPA) published a statement on the requirement under EMIR to exchange variation margin exchange for uncleared OTC derivative contracts, in response to industry requests relating to operational challenges in meeting the 1 March 2017 deadline for exchanging variation margin. It explains that neither they nor competent authorities have the power to disapply directly applicable EU legal text. The Central Bank then issued a Q&A acknowledging the difficulties facing market participants in meeting the 1 March 2017 deadline, stating it does not expect market participants to unwind or avoid transactions that they would have otherwise entered into, but it expects to see evidence of robust planning to achieve compliance at the earliest possible time for all in-scope transactions entered into from 1 March 2017.

The US Commodity Futures and Trading Commission ("CFTC") issued a 'no action' letter in respect of non-compliance with the 1 March 2017 deadline giving CFTC-regulated firms a further six months to put in place regulation-compliant documentation.

On 25 February 2017 Commission Delegated Regulation (EU) 2017/323 correcting Delegated Regulation (EU) 2016/2251 (prescribing collateral requirements for non-cleared OTC contracts) was published in the Official Journal of the EU and also came into force. It applies retrospectively from 4 January 2017 and clarifies the applicable transitional periods for intragroup transactions where the counterparty to the transaction is located in a third country, pending an equivalence decision in respect of margining requirements in that third country.

On 16 March 2017 the European Commission adopted a Delegated Regulation relating to the EMIR clearing obligation to prolong, by two years, the phase-in period for financial counterparties with a limited volume of OTC derivatives activity (that is, those counterparties classified in category 3 under the Delegated Regulation). Category 3 counterparties include UCITS and AIFs that do not have existing OTC clearing arrangements in place and have non-cleared OTC derivatives exposure levels under €8 billion. The new start date for the clearing obligation for category 3 counterparties is 21 June 2019. The Delegated Regulation amends three EMIR Delegated Regulations which had specified start dates of 21 June 2017 for OTC interest rate derivatives referencing major indices denominated in EUR, GBP, JPY, and USD and 9 February 2018 for OTC index credit default swaps and OTC interest rate derivatives referencing major indices denominated in NOK, PLN and SEK. The next step is for the Council of the EU and the European Parliament to consider it.

On 31 March 2017 ESMA published its final report setting out policy decisions and the final text of eight sets of regulatory technical standards ("RTS") and implementing technical standards ("ITS") implementing the SFTR and related amendments to EMIR RTS, see 1.8 on the SFTR below for further detail. The Commission has three months (extendable by one month) to decide whether to endorse them.

To read this Update in full, please click here.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions