Ireland: Funds Quarterly Update Q4 | October - December 2017

1 LEGAL & REGULATORY

1.1 UCITS Update

There have been a number of developments over the quarter:

Central Bank Q&A

On 6 October 2017 the 20th edition of the Central Bank of Ireland ("Central Bank") UCITS Q&A was published with a new question on the maintenance of a designated email address for regulatory correspondence in respect of Irish UCITS.

The Q&A was further updated on 20 November 2017 in relation to a UCITS acquiring Chinese shares through the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect. It was updated to coincide with the roll-out of a real-time delivery versus payment ("RDVP") settlement system under Stock Connect, which was approved by the Securities and Futures Commission of Hong Kong ("SFC") and officially went live on the same date.

On 2 January 2018 a further edition added two new questions. One confirms that the name of the benchmark administrator does not need to be identified in the UCITS prospectus in the context of the Benchmark Regulation. The other question on the PRIIPS Regulation confirms that UCITS are exempt from producing a PRIIPS KID until 31 December 2019.

ESMA Q&A

On 5 October 2017 the European Securities and Markets Authority ("ESMA") updated its Q&A on the application of the UCITS Directive (2009/65/EC). It includes a new Q&A on the periodic reporting (under Article 13 of the SFTR) for UCITS and alternative investment funds ("AIFs") to investors on the use of securities financing transactions ("SFTs") and total return swaps.

1.2 AIFMD Update

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

Central Bank Q&A

On 6 October 2017 the Central Bank published the 26th edition of its AIFMD Q&A with a new question on the maintenance of a designated email address for regulatory correspondence in respect of Irish authorised AIFs.

The Q&A was further updated on 20 November 2017 in relation to an AIF acquiring Chinese shares through the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect. It was updated to coincide with the roll-out of a RDVP settlement system under Stock Connect, which was approved by the SFC and went live on the same date.

On 2 January 2018 a further edition of the Q&A added a new question confirming that there is no obligation on an Irish authorised AIFM managing AIFs which reference a benchmark in the prospectus to comply with the Article 29(2) disclosure requirements in the Benchmark Regulation unless the AIF is subject to the Prospectus Directive 2003/71/EC. It also added new questions on the PRIIPS Regulation which confirms that QIAIFs are required to produce a PRIIPS KID if it can be marketed to investors who are not professional clients under MiFID II and that the Central Bank is likely to require AIFs in scope of PRIIPS to file KIDs on an ex post basis.

See our update, Do AIFs Need to Produce a PRIIPs KID?

ESMA Q&A

On 5 October 2017 ESMA updated its Q&A on application of AIFMD. It includes three new Q&A on the:

  1. Application of remuneration disclosure requirements in annual accounts to staff of the delegate of an alternative investment fund manager ("AIFM") to whom portfolio management or risk management activities have been delegated.
  2. Manner of disclosure of AIFM delegates' staff remuneration in annual reports.
  3. Periodic reporting (under Article 13 of the SFTR) for UCITS and AIFs to investors on the use of SFTs and total return swaps.

We are working with clients to assess the implications of this guidance.

1.3 GDPR for Irish Funds

The General Data Protection Regulation (EU) 2016/679 ("GDPR") will become law across the EU on 25 May 2018. It updates the current data protection regime in Ireland and replaces the current rules on the collection, storage and processing of personal data in the Data Protection Acts 1988 to 2003. Firms need to be compliant by 25 May 2018.

Maples' GDPR update package helps ensure compliance for funds and fund management companies. For more information see our client updates:

GDPR and the Funds Industry – What you Need to Know

GDPR for Funds: Is Consent Required From Investors?

1.4 New EU Securitisation Regulation

Regulation (EU) 2017/2402 on a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation ("Securitisation Regulation") and Regulation (EU) 2017/2401 amending the Capital Requirements Regulation 575/2013/EU were published in the Official Journal on 28 December 2017. Both regulations enter into force on 17 January 2018 and will apply from 1 January 2019.

The Securitisation Regulation impacts both AIFs and UCITS. AIF managers' current due diligence, transparency and risk retention requirements under AIFMD will be repealed and replaced by the Securitisation Regulation. It will also bring UCITS management companies and internally managed UCITS that are authorised investment companies into the framework. For UCITS management companies and internally managed UCITS, no due diligence rules will apply initially. The European Commission may adopt delegated regulations under the UCITS Directive to bring them under the due diligence rules in the future.

For more information see our client update, New EU Securitisation Regulation: Impact for Investment Funds

1.5 Central Bank Brexit Letter

The Central Bank issued a letter to industry on 6 November 2017 on Brexit contingency planning for investment funds. It indicates what investment funds and their managers should consider when planning for Brexit and fulfilling their obligations to their investors. It indicates that the boards of these entities should be analysing the potential impact of Brexit on asset management and distribution and should include examining the extent to which Brexit will affect fund investors, their day-to-day fund operations and delivery of investment strategies.

We are working with clients in addressing the actions mandated in this letter.

1.6 Money Market Funds Regulation

The Money Market Funds Regulation (EU) 2017/1131 ("MMFR") came into force on 20 July 2017. It is a broad set of new regulatory measures that apply to money market funds established, managed or marketed in the EU and aims to make these investment products more resilient and resistant to contagion risks.

Most provisions apply from 21 July 2018 (with the exception of Article 11(4), Article 15(7), Article 22 and Article 37(4) which apply from 20 July 2017). Existing MMFs can avail of a further six month transition period to submit an application to the national competent authority ("NCA") demonstrating compliance with the MMFR.

On 17 November 2017 ESMA published technical advice, implementing technical standards ("ITS") and guidelines under the MMFR. The key requirements include:

  • Advice relating to asset liquidity and credit quality.
  • ITS on the development of a reporting template containing the information that MMF managers must send to the MMF's NCA.
  • Guidelines on common reference parameters of the scenarios that need to be included in MMF managers' stress tests.

The technical advice and ITS have been submitted to the European Commission (in the case for endorsement).

With respect to the ITS on the establishment of a reporting template and the timing of implementation of the corresponding database, ESMA confirms that managers will need to send their first quarterly reports to NCAs in October/November 2019.

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.

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