Ireland: Asset Management & Investment Funds

Dillon Eustace Checklist B

Internally-Managed QIAIF ICAV (availing of the registration exemption)

Material Documents

1.

Central Bank Application for Registration as Alternative Investment Fund Manager

An application form detailing the identity of the proposed AIFM and providing information regarding the AIFs (i.e. the QIAIF itself) under management must be completed and submitted by the AIFM. A copy of the application form may be obtained on the Central Bank website.

2.

Central Bank Application for Registration as an ICAV

To obtain registration as an ICAV it is necessary to submit an application form to the Central Bank together with the Instrument of Incorporation of the ICAV (see point 3 below). A copy of the ICAV registration form may be located on the Central Bank website.

3.

Instrument of Incorporation

This is the constitutional document of the AIFM (and QIAIF) which sets out the internal rules for the AIFM (and QIAIF). The instrument of incorporation of the AIFM (and QIAIF) must be sufficiently wide to operate in accordance with AIFMD and the conditions imposed by the Central Bank.

4.

Board Operating Procedures

A registered AIFM is not required to produce a Programme of Activity (as would be required by the Central Bank for an authorised AIFM). However, registered AIFMs may establish a Board Operating Procedures document which clearly outlines the oversight and reporting within the registered AIFM. The Board Operating Procedures may also set out a formal schedule of matters specifically reserved to it for decision. It may also incorporate details of the QIAIF’s Anti-Money Laundering and Conflicts of Interest Policies.

An extract of a sample Board Operating Procedures may be accessed via this [LINK].

5.

Policies and Procedures

The Central Bank have prescribed a number of organizational requirements which are applicable to registered AIFM’s. Documented policies and procedures in respect of these matters are required. Such matters include (i) the monitoring of assets under management (“AUM”); and (ii) AIFMD Reporting.

A sample Monitoring of Assets Under Management Policy may be accessed via this [LINK]

6.

Individual Questionnaires

The Central Bank will need to approve each individual that it is proposed will act as a director of the AIFM (and QIAIF) as well as each individual who has a direct/indirect holding in the AIFM which represents 10% or more of the capital/voting rights in the AIFM and any other individual who is in a position to exercise significant influence over the management of the AIFM. As part of the approval process an individual questionnaire must be completed by each director of the AIFM and submitted to the Central Bank. The individual questionnaire is a comprehensive document and requires a high level of detail in respect of each director such as career history, directorships and qualifications, business interests and references. This individual questionnaire is completed on-line and a copy may be obtained on the Central Bank website.

Dillon Eustace can provide guidance on this application process

7.

Fitness and Probity/Director Letter of Appointments

Pursuant to the Central Bank’s Fitness and Probity Standards (the “F&P Standards”), a director of a QIAIF/AIFM is prescribed as a pre-approved controlled function (“PCF”). Accordingly, in addition to the fact each director needs to complete and submit an individual questionnaire to the Central Bank (as described above), the QIAIF/AIFM must also satisfy itself that the director is fit and proper for the role. It is therefore necessary for the QIAIF/AIFM to carry out due diligence checks on the director and to seek certain confirmations within a letter appointing the director. Dillon Eustace, as legal advisors, assist in the compilation of the due diligence checks and the letters of appointment.

The fitness and probity documentation must be maintained by the QIAIF/AIFM in readily accessible form so that the Central Bank can inspect it upon request.

Material Contracts

1.

Prospectus

A QIAIF must publish a prospectus which must be dated and the essential elements of which must be kept up to date. The prospectus must contain sufficient information to enable investors to make an informed judgement of the proposed investment. The Central Bank prescribes the minimum content requirements of the prospectus. Such requirements include, but are not limited to, disclosure on specific information in relation to the QIAIF itself (name, form in law, registered/head office, date of establishment / incorporation and limited duration, if any), the investment objectives and policies, investment risk factors details regarding the directors and their experience, the material provisions of material contracts with the service providers and a description of fees and charges and other applicable expenses.

Dillon Eustace as legal advisers prepare the prospectus with input from the client and the various service providers.

2.

Investment Management Agreement

The AIFM will appoint an investment manager pursuant to an investment management agreement. It is important to note that an AIFM cannot delegate the performance of investment management functions to an extent that exceeds by a substantial margin the investment management functions performed by the AIFM itself. The investment manager must be an entity which has been approved to act as investment manager for Irish regulated collective investment schemes by the Central Bank. Generally, for an Irish entity to act as investment manager to an Irish regulated fund, it needs to be regulated under appropriate legislation (such as AIFMD, UCITS, MiFID or equivalent) to act as an investment manager. The Central Bank will also approve investment managers from jurisdictions which it considers to be of equivalent status.

Dillon Eustace as legal advisers prepare the investment management agreement with input from the client.

3.

Distribution Agreement

The AIFM may appoint a head distributor with responsibility for the distribution, marketing and sales of shares of the QIAIF. The head distributor would the typically be authorised by the QIAIF to appoint sub-distributors in jurisdictions in which the AIFM is authorised to market the shares of the QIAIF. It is often the case that the investment manager may also be appointed as head distributor.

In respect of Registered AIFMs, it is important to remember that they are not entitled to avail of the AIFMD cross-border marketing passport.

Dillon Eustace as legal advisers prepare the distribution agreement with input from the client

4.

Depositary Agreement

The QIAIF is required to appoint a single depositary which is responsible for custody and/or oversight of assets. The depositary must meet eligibility requirements pursuant to AIFMD. The depositary will provide the draft depositary agreement which is then reviewed and negotiated as required by the legal advisers.

While the QIAIF is availing of the registered AIFM exemption, the Central Bank has prescribed that it is not necessary for the full depositary liability provisions set out in the AIFMD to be included in the depositary agreement. Instead it is possible to include the liability provisions contained in the Central Banks Non-UCITS Notices (which pre-dated AIFMD and were replaced by the Central Bank AIF Rulebook). This will be a matter for commercial negotiation at the time of entering into the depositary agreement However, parties should be aware that once the Transitional Period has elapsed that the full depositary liability provisions set out in AIFMD will apply (and if necessary the depositary agreement should be updated).

5.

Administration Agreement

It is also necessary to appoint an administrator who maintains the QIAIFs records and carries out other functions such as calculating the net asset value of the QIAIF and preparation of the periodic reports. The administrator will provide the draft administration agreement which is then reviewed and negotiated as required by the legal advisers.

6.

Prime Brokerage Agreement

The AIFM may choose to appoint a prime broker to provide services such as clearing and custody facilities, intraday credit to facilitate foreign exchange payments and securities transactions, margin credit to finance purchases of equity securities and securities lending to support the short positions of the QIAIF. The prime broker will provide the draft prime brokerage agreement which is then reviewed and negotiated as required by the legal advisers. It is typically always also necessary for the QIAIF’s depositary to appoint the prime broker as a sub-depositary.

7.

Letter of Application

The Central Bank requires a QIAIF to submit a standard letter of application seeking authorisation. Dillon Eustace as legal advisers prepare the letter of application

8.

Central Bank Application Forms

The Central Bank has an application form relevant to each of the various agreements above. There is also an application form which provides an overview of the QIAIF to the Central Bank and confirms the details within the application are correct and consistent with the legislation and Central Bank requirements. This particular application form must be signed by both the QIAIF and the depositary. These applications forms must be completed and submitted to the Central Bank. Certain letters of confirmation may also be required as part of the application process. Dillon Eustace as legal advisers prepare the Central Bank application forms with input from the client as necessary.

9.

Share Application Form

A share application form will need to be prepared (this is not submitted to the Central Bank for approval). The share application form needs to be completed by each investor and provides the QIAIF with the necessary details on the investor together with certain representations, confirmations and indemnities in respect of the investment. The administrator will often provide a standard draft share application form which the legal advisers and client review.

Additional Considerations:

10.

Anti-Money Laundering and Terrorist Financing Policy

The QIAIF is a ‘designated person’ pursuant to the Criminal Justice (Money Laundering and Terrorist Financing) Acts 2010 – 2013 and as such is required to put in place its own Anti-Money Laundering and Terrorist Financing Policy (“AML Policy”). The entity appointed as administrator of the QIAIF will typically be responsible for carrying out the necessary anti-money laundering procedures for and on behalf of the QIAIF. The QIAIF’s AML Policy therefore needs to be consistent with the administrator’s policy.

11.

Money Laundering Reporting Officer

The Central Bank expects a money laundering reporting officer (“MLRO”) to be appointed for a QIAIF. The MLRO is responsible for receiving, assessing and passing to the relevant authorities any reports of suspicions of possible money laundering with respect to the investors in the QIAIF. The MLRO should be provided with direct access to the Board of Directors of the QIAIF and to the administrator in order to effectively carry out its duties.

A letter of appointment in respect of the MLRO should be put in place with the QIAIF.

12.

Secretary

Each QIAIF structured as an ICAV is required to have a secretary. The secretary is typically responsible for completion and filing of certain statutory forms with the Central Bank, convening meetings of the board of directors and maintaining the minutes of board meetings.

A letter of appointment should be in place between the QIAIF and the secretary.

13.

Auditor

An auditor will need to be appointed to the QIAIF. The QIAIF is required to produce annual audited accounts.

An engagement letter with the Auditor will generally be put in place outlining the range and scope of services to be provided by the Auditor along with details of the fees which will be imposed.

14.

Central Bank Online Reporting System – System Administrator

The Central Bank requires QIAIFs to submit financial data and other materials at specified intervals. The information is used as a way of monitoring the operations of the QIAIF and its compliance with the relevant requirements. The information is submitted via the Central Bank’s Online Reporting System (“ONR”). A System Administrator with respect to the ONR is required to be appointed.

This is usually someone within the Promoter or Investment Manager or alternatively, could be a third party service provider appointed for the purpose.

15.

Service Level Agreements

Service level agreements with certain of the service providers, including the investment manager, the administrator and the depositary, may need to be put in place detailing matters such as operating procedures and key performance indicators.

16.

Other Agreements

It may be necessary for the QIAIF to make other appointments in order to meet its regulatory requirements. For example, it may be necessary to enter into a FATCA Services Agreement.

Any additional agreements which are required for an individual QIAIF can be reviewed and negotiated in conjunction with your legal advisor.