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The purpose of this briefing note is to provide information on
the review by the Central Bank of the business plans for UCITS
self-managed investment companies ("SMICs"). The Central
Bank reviewed the business plans of all UCITS management companies
for UCITS IV compliance on or before 1 July 2011. However, for all
UCITS SMICs authorised prior to 1 July 2011, the Central Bank
proceeded on the basis that each of these self-certified that they
met the UCITS IV requirements before 1 July 2011 and it was known
that the Central Bank would begin to carry out reviews of these
business plans in 2012.
In February 2012 the Central Bank proposed a timetable for the
review of the UCITS SMIC business plans based on the date of their
authorisation. Before this review process got underway the Legal
and Regulatory Committee of the IFIA requested that the Central
Bank reconsider its approach to the application of all of the
organisational rules that apply to UCITS management companies to
SMICs. The Level 2 measures1 highlighted the need to
have the same rules of conduct and provisions regarding conflicts
of interest and risk management for both types of entities.
However, some organisational rules were applied by the Level 1
measures2 to both SMICs and UCITS management companies
and yet the other organisational rules in the Level 2 measures
applied only to UCITS management companies. The Central Bank took
the position that all UCITS SMICs must be fully UCITS IV compliant
- in other words that they adopt all the same rules as those that
apply to UCITS management companies. However, as a consequence of
the IFIA submission the Central Bank has confirmed that because
proposed amendments to the UCITS regime contemplated by the UCITS
IV Directive do not include common organisational rules for the two
entities, the Central Bank is willing to reconsider the
applicability of all of the organisational rules to SMICs.
Although the Central Bank's starting point is that both
UCITS management companies and SMICs should be subject to the same
regime, it acknowledges that a UCITS management company may engage
in more complex activities (for example, in individual portfolio
management and passporting into other EU jurisdictions) and so not
all of the organisational rules that it adheres to should apply to
SMICs.
In short, the Central Bank has requested that the IFIA make a
submission which addresses why each particular organisational rule
should not apply to SMICs. This submission is to be made to the
Central Bank by 21 May 2012.
We would expect the Central Bank to respond promptly to that
submission given that is has already indicated that it would like
the majority of the reviews of the business plans to be completed
by early 2013. In the meantime, the original proposed dates for the
submission of the business plans for review no longer apply. Once a
final position of the applicability of the organisational rules is
determined, the Central Bank will issue revised deadlines for the
submission of the draft SMIC business plans for review.
We will be in touch with clients shortly to provide an update on
this review and the revised timing for the submission of business
plans.
Footnotes
1 Directive 2010/43/EC
2 Directive 2009/65/EC
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.
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