1.1 AIFMD Update

On 16 July 2013, the European Union (Alternative Investment Fund Managers) Regulations 2013 (No. 257 of 2013) gave effect to the Alternative Investment Fund Managers Directive (2011/61/EU) ("AIFMD") in Ireland.

There have been a number of developments over the quarter:

  1. In the previous quarter, the Central Bank of Ireland (the "Central Bank") notified all investment funds authorised in accordance with the NU Notices and their proposed alternative investment fund managers ("AIFMs") that the transitional date for compliance with AIFMD is 22 July 2014. The Central Bank also set 21 February 2014 as the latest date for receipt of applications seeking authorisation as an AIFM including internally managed alternative investment funds ("AIFs").

    The Central Bank has stated that submissions for retail investor alternative investment funds ("RIAIFs") should be made prior to 30 May 2014. As regards qualified investor alternative investment funds ("QIAIFs") submissions, the Central Bank has requested that a list of expected submissions should be submitted prior to 11 April 2014.

    For AIFs whose AIFMs are not expected to be authorised prior to 22 July 2014 revised documentation should be submitted once the AIFM is authorised.
  2. On 4 February 2014, the Central Bank published an updated AIFMD Question and Answers ("Q&A") document (7th edition). It contains answers to queries likely to arise in relation to the implementation of AIFMD. It amends questions ID 1019 which relates to the Markets in Financial Instruments Directive (2004/39/EC) ("MiFID") and outlines a new approach to the passporting of services for AIFMs. It also updates ID1025 and ID1026 (regarding transitional arrangements for AIFM authorisations).

    On 7 March 2014, the Central Bank issued a further updated AIFMD Q&A document (8th edition). It amended questions ID1041 (AIFs in liquidation during the transitional period and whether authorisation is required where no new AIF will be established); ID1046 (non-EU AIFM marketing of both EU and non-EU AIFs in Ireland and reporting); and ID1058 (professional investor funds and rules that apply). Two new questions ID 1069 (MiFID authorisations and AIFMs providing investment management services to managed accounts) and ID 1070 (procedure when an AIFM proposes to appoint an unregulated delegate investment manager) were also included.

    The Central Bank will continue to update the Q&A as additional queries are raised.
  3. The European Securities and Markets Authority ("ESMA") published Q&As on the application of AIFMD on 17 February 2014 (2014/ESMA/163). This promotes common supervisory approaches and practices in the application of AIFMD and its implementing measures. The questions relate to (i) the start date of the remuneration rules (dependent on entity authorisation); (ii) remuneration rules which apply in the case of delegation of portfolio management or risk management activities; (iii) Annex IV of AIFMD; (iv) notification of AIFs; and (v) reporting by non-EU AIFMs under Article 42 of AIFMD.

    This document is aimed at competent authorities under AIFMD to ensure that in their supervisory activities their actions are converging along the lines of the responses adopted by ESMA. However, the answers are also intended to help AIFMs by providing clarity as to the content of the AIFMD rules, rather than creating an extra layer of requirements.

    For further details please see our client update, ESMA AIFMD Q&A: Clarity on key remuneration and marketing issues.

    On 25 March 2014, ESMA further updated its Q&A on the application of AIFMD (2014/ESMA/296). Questions 2 to 18, which concern reporting to national competent authorities (such as the Central Bank) under Articles 3, 24 and 42 of AIFMD were added.
  4. On 7 March 2014, the Central Bank issued a short consultation on carrying out depositary duties in accordance with Article 36 of AIFMD (CP78). Article 36 provides that EU Member States may allow an authorised EU AIFM to market units of non-EU AIFs it manages to professional investors in their territory. This marketing is subject to a number of restrictions including a requirement that the AIFM must ensure that one or more entities are appointed to carry out the duties referred to in Article 21(7) (monitoring of cash flows of the AIF); Article 21(8) (safe-keeping of the AIF assets); and Article 21(9) (oversight of AIFM operations).

    This consultation paper considers the requirements that should apply to manage conflicts of interest where it is proposed that the entity providing administration services to a non-EU AIF should also perform the depositary duties, as set out in Articles 21(7) and 21(9) of AIFMD, for the same non-EU AIF. The key question is how to mitigate the conflicts of interest which arise for individual staff members in this instance. To address this, the Central Bank proposes that this overlap occurs only at the highest management levels and there must be strict Chinese walls at lower levels.

    Responses to the consultation are requested by 30 May 2014.
  5. On 7 March 2014, the Central Bank also published a notice providing more detail on AIFMD reporting requirements which includes a matrix outlining the first reporting periods under different reporting frequency scenarios. The Central Bank will be contacting AIFMs prior to the first submission in relation to their reporting requirements and regulatory returns must be filed on the Central Bank's online reporting system.
  6. On 7 March 2014, the Central Bank issued updated guidance relating to third party approval and fund authorisation processes.

    This guidance notes that investment managers or sub-investment managers will generally not be subject to an additional regulatory review process if they fall into one of the following categories:

    1. UCITS management companies authorised under Directive 2009/65/EC ("UCITS Directive");
    2. investment firms authorised under MiFID to provide portfolio management;
    3. credit institutions authorised under Directive 2006/48/EC to provide portfolio management under MiFID; and
    4. externally appointed AIFMs authorised under AIFMD.
    Further guidance is available for firms where the competent authority in the home jurisdiction of the investment manager has signed a memorandum of understanding ("MoU") with the Central Bank.

    The Central Bank also confirmed that it will not apply an approval process to investment advisors provided that confirmation from the relevant AIF is given that the advisor is acting in an advisory capacity only. Further, the Central Bank confirmed that formal reviews will not be carried out on investment advisory agreements provided the AIF confirms that that the agreement does not confer any discretionary management powers nor does it conflict with Central Bank requirements.
  7. On 10 March 2014, the European Parliament updated its procedure file on the proposed delegated regulation (the "Regulation") supplementing Regulation 575/2013, setting out regulatory technical standards ("RTS") determining types of AIFMs. It indicates that on 6 March 2014 the European Parliament extended the timeframe for examining the Regulation by three months. The RTS specify the characteristics of AIFMs managing open-ended AIFs. An AIF is considered open-ended if its shares or units are, at the request of any of its shareholders or unitholders, repurchased or redeemed prior to the commencement of its liquidation phase or wind-down, directly or indirectly, out of the assets of the AIF and according to the procedures and frequency set out in the AIF's rules of incorporation, prospectus or offering documents.
  8. On 20 March 2014, the Irish Funds Industry Association ("IFIA") depositary committee released a guidance paper to assist industry meet the obligations imposed on depositaries to verify the ownership of those other assets which have been verified as belonging to an AIF.
  9. On 27 March 2014 ESMA issued technical advice in response to the mandate received from the European Commission on 20 December 2013 for advice on the possible content of the delegated act required by Article 67(5) of AIFMD, concerning the information that EU competent authorities have to provide to ESMA on a quarterly basis pursuant to Article 67(3). This information is needed in order to allow ESMA to produce the opinion and the advice required in Article 67(1) of AIFMD, in relation to the possible extension of the AIFMD passport to non-EU AIFs and non-EU AIFMs.

    Section II describes the background of the proposal. Section III specifies the timing for the provision of the information to ESMA and lists the information that the competent authorities should provide quarterly. The list of information is divided into three parts: the first refers to the information about the functioning of the passport for EU AIFMs; the second deals with the functioning of the national private placement regime for non-EU AIFs and non-EU AIFMs; and the third refers to the issues arising from the functioning of both systems. Finally, Section IV reproduces the mandate for advice issued by the European Commission.
  10. On 28 March 2014, the Central Bank published all response papers it received in relation to CP68 (Consultation on types of alternative investment funds under AIFMD and unit trust schemes under the Unit Trusts Act 1990 (including EUTs, REITs etc.)) as well as its feedback statement.

1.2 Irish Collective Asset-Management Vehicle Bill

The IFSC Strategy Statement 2011-2016 committed the Irish Government to the development of proposals for a new type of corporate vehicle for the funds industry. As highlighted in our last publication, the general scheme of the Irish Collective Asset-Management Vehicle ("ICAV") Bill was published on 20 December 2013.

There has been no update from the Department of Finance as to when the final Bill will be published and introduced into the Dáil, however it is expected to come into effect in 2014.

The advantages of the ICAV are that they will be eligible for classification under the US "check-the-box" taxation rules and as such receive more favourable tax treatment in the US. Further, existing funds will have the option to convert to ICAV status.

1.3 Money Market Funds - Vote Postponed

On 4 September 2013, a draft "Proposal for a Regulation of the European Parliament and of the Council on Money Market Funds" (the "Draft Regulation") was released by the European Commission. It contains radical new proposed regulatory measures that would apply to European money market funds ("MMFs"), both in the context of UCITS and funds within the scope of AIFMD. The European Parliament's Committee on Economic and Monetary Affairs ("ECON") issued a report on 15 November 2013 proposing amendments to the Draft Regulation. The most significant proposal is that five years after the Draft Regulation enters into force, all MMFs in scope that operate with a constant net asset value ("CNAV") must be converted into variable net asset value MMFs.

Significantly, a committee of the European Parliament vote on the Draft Regulation and the ECON Report on 10 March 2014 was postponed. It has not yet been re-scheduled.

1.4 Publication of a UCITS Rulebook and First UCITS Q&A

On 2 January 2014, the Central Bank published a consultation on a UCITS Rulebook (CP77). It proposes publishing a UCITS Rulebook which will consolidate into one document all of the conditions which the Central Bank imposes on UCITS, their management companies and depositaries. In addition, the question arises as to whether any aspects of the current regulatory regime which are within the discretion of the Central Bank are no longer necessary or appropriate.

The format of the UCITS Rulebook follows closely that of the AIF Rulebook. It contains the following three chapters:

  1. Product Requirements.
  2. Management Company Requirements.
  3. Depositary Requirements.

Draft versions of each of these chapters form part of this consultation which closed on 28 March 2014. Maples and Calder consulted on the IFIA consultation response and also responded directly to the Central Bank on behalf of certain clients.

On 6 February 2014, the Central Bank published on its website its first UCITS Q&A.

1.5 UCITS V Update

UCITS V consists of proposed reforms to the UCITS regime intended to address issues relating to the depositary function, manager remuneration and administrative sanctions. On 25 February 2014, the European Parliament and Council reached an agreement on some outstanding issues in relation to the draft UCITS V Directive (the "UCITS V Directive"):


Remuneration rules will be introduced to deter excessive risk taking by managers of UCITS and increase transparency. The rules will be broadly consistent with those in AIFMD. Prior initiatives, during the legislative process, to take the scope of these rules further than AIFMD (in terms of the nature of the rules and the range of persons they apply to) have not materialised. ESMA will draft guidelines on the staff to be covered by the remuneration rules.


The agreement reached requires each UCITS to appoint a single depositary and clarifies the categories of entity that shall be eligible to act as a depositary. The depositary's liability has also been adjusted, consistent with the standard of liability of a depositary under AIFMD. This represents a higher standard than currently applied for UCITS.


The agreement reached has also harmonised the administrative sanctions with maximum penalties of at least €5 million (or 10% of annual turnover) for a company or at least €5 million for individuals. The use of criminal sanctions is also captured so as to ensure a harmonised approach across EU Member States. It should be noted that under the Central Bank (Supervision and Enforcement) Act 2013, the relative penalty for individuals is a maximum of €1 million and as such this could cause some operational issues.

On 14 March 2014, the Council of the EU published an "I" item note from its General Secretariat to the Permanent Representatives Committee (Part 1) ("COREPER") setting out the final compromise text of the proposed UCITS V Directive inviting them to approve the final compromise text. COREPER approved it on 19 March 2014. This will enable the UCITS V Directive to be adopted at first reading by the European Parliament on 15 April 2014. EU Member States will have 18 months to transpose the UCITS V Directive into national law and depositories will be given an additional 24 month transition period after the transposition deadline.

For further details please see our latest client update, UCITS V: Impact Assessment.

1.6 Fast-Track Authorisation Process for Investment Firms

On 8 January 2014, the Central Bank launched its new authorisation process for investment firms under MiFID. The Central Bank determines the complexity of the business model firstly. If a firm is deemed to be a more straightforward application, the application will be processed within three months whereas more complex applications will be processed within six months. Both processes contain various checkpoints and timing deadlines in regards the exchange of correspondence.

The Central Bank intends to review the authorisation process before the end of 2014.

1.7 EMIR Update

The European Market Infrastructure Regulation ("EMIR") (the Regulation on OTC derivatives, central counterparties ("CCPs") and trade repositories ("TRs")) (Regulation 648/2012) came into effect on 16 August 2012. The European Commission has adopted implementing legislation based on technical standards drafted by ESMA in respect of most aspects of EMIR. These measures began to come into effect on 15 March 2013 on a phased basis. Recent developments this quarter are as follows:

  1. In early February 2014, the Central Bank published a FAQ on EMIR issues that are specifically related to Ireland. It will be updated as questions arise.
  2. On 11 February 2014, ESMA updated its Q&A (ESMA/164) on the implementation of EMIR. These clarify, among other things, issues relating to reporting derivatives trades to trade repositories (such as how to construct and generate unique trade identifiers, reporting empty or unavailable fields and the unique product identifier taxonomy). Other areas updated relate to OTC derivatives and central counterparty requirements. ESMA commented in an accompanying press release that it appreciates that both reporting firms and TRs will need a certain amount of time to properly incorporate the new guidance. It further updated its Q&A on 20 March 2014. The updated Q&A includes a table detailing which questions have been updated on this date and to which Article(s) in EMIR the updated questions relate. They concern intragroup transactions, notional amounts, risk mitigation techniques for OTC derivative contracts not cleared by a CCP, reporting of outstanding positions following the entry into force of EMIR (backloading) and various issues relating to trade reporting requirements.
  3. Trade reporting obligations started on 12 February 2014. The requirement for financial counterparties (AIFs and UCITS) and non-financial counterparties to report collateral arrangements and daily mark-to-market valuations of OTC derivatives will take effect six months later than the other elements of reporting, i.e. from 12 August 2014.
  4. On 13 February 2014, the European Commission updated its webpage on EMIR to announce that it has adopted RTS specifying the contracts that are considered to have a direct, substantial and foreseeable effect within the EU, and to prevent the evasion of rules and obligations. The Commission's website states that the RTS have been endorsed by the Commission without modification.
  5. On 14 February 2014, ESMA asked the European Commission to clarify the definition of derivative under MiFID/EMIR. On 20 March 2014, a response letter (dated 26 February 2014) was published confirming that lack of clarity about the precise delineation between FX forward contracts and currency spot contracts under MiFID (which is referred to in EMIR). It states that the European Commission must consider which delivery periods are appropriate in the FX forwards market when considering the delineation between derivative and spot contracts. (The Central Bank had previously advised that FX forwards settled from T+3 should be treated as derivatives, whereas in other jurisdictions up to T+7 is still a spot transaction.) ESMA has been asked to set out details of how the definition of a derivative and an FX forward has been transposed by national competent regulators. ESMA has also been asked to give details of the commonly accepted delivery periods for currencies in the EU Member States and the developments in the FX markets since MiFID was introduced. What exactly constitutes an OTC derivative on commodities (as distinct from commodity forwards which are listed or traded on a multi-lateral trading facility) is also posing issues. EMIR references the MiFID definition of derivatives, under which OTC derivative contracts on commodities are defined as "not being for commercial purposes" and which "can" be physically settled; both concepts that need further work. The resolution of these uncertainties will determine which FX transactions and which OTC commodities transactions are actually in scope for EMIR.
  6. Following the authorisation of NASDAQ OMX as the first EU-based CCP on 18 March 2014, ESMA published a list of authorised CCPs, being NASDAQ OMX only, as well as a list of the OTC derivatives it is authorised to clear on 19 March 2014.
  7. On 21 March 2014, the European Commission delegated regulation (Regulation 285/2014) supplementing EMIR with regard to RTS specifying the contracts that are considered to have a direct, substantial and foreseeable effect within the EU, and to prevent the evasion of rules and obligations was published in the Official Journal of the EU. It will enter into force 20 days after the date of its publication. However, Article 2 (which is the substantive article governing contracts between third country entities that will be in scope) will apply from 10 October 2014.

Maples and Calder has a note on EMIR: Update and assessment of its impact for investment funds which is available on request.

1.8 PRIPs KID Regulation

On 1 April 2014, the European Parliament announced that it has reached political agreement with the Council of the EU on the proposed regulation on key information documents for packaged retail investment products ("PRIPs KID Regulation"). On 4 April 2014, COREPER approved the agreement. The agreement follows from the general approach on the PRIPS KID Regulation agreed by the Council in June 2013 and the Parliament's November 2013 vote on amendments to the PRIPS KID Regulation. The Parliament is expected to adopt the PRIPS KID Regulation at its plenary session on 15 April 2014.

1.9 Prospectus Directive Update

On 15 January 2014, ESMA published the 21st version of its Q&A on Directive 2003/71/EC ("Prospectus Directive"), including two new questions. The new questions concern the format for the individual summary for several securities as well as the applicable registration document schedule in certain circumstances.

Further details can be found on ESMA's website: http://www.esma.europa.eu/news/ESMA-publishes-updated-QA-Prospectus-Directive?t=326&o=home.

On 12 March 2014, the European Parliament published the provisional edition of a legislative resolution to adopt, with amendments, the European Commission's proposal for a directive amending the Prospectus Directive and the Solvency II Directive (2009/138/EC) in respect of the powers of the European Supervisory Authorities. The text now requires the competent authority of the relevant home member state to communicate those final terms of any offer that are not included in the base prospectus or supplement to the competent authority of the host member state and to ESMA (in place of communication by the issuer, offeror or person asking for admission to trading on a regulated market). The text also makes minor changes to the Commission's proposed amendments to Articles 11(3), 13(7), 14(8) and 15(7) of the Prospectus Directive. These articles set out ESMA's obligation to draft RTS by 1 July 2015 to specify:

  • the information that may be incorporated by reference in a prospectus;
  • the procedures for the approval of the prospectus and the conditions in accordance with which time limits may be adjusted; and
  • the provisions relating to the publication of the prospectus in paragraphs 1 to 4 of Article 14 of the Prospectus Directive.

The provisions concerning the dissemination of advertisements announcing the intention to offer securities to the public or admission to trading on a regulated market, in particular before the prospectus has been made available to the public or before the opening of the subscription and specifying the provisions in Article 15(7) of the Prospectus Directive.

The adopted text will be forwarded to the Council under the ordinary legislative procedure.


On 14 January 2014, the European Commission published a regulation ("MiFIR") and a directive to replace MiFID (known as "MiFID II") and an agreement was reached in principle in trilogue on MiFIR and MiFID II. A formal date of implementation has not yet been announced however as an EU press release noted that further fine tuning is required in forthcoming technical meetings. The earliest effective date of MiFID II/MiFIR will be 2016.

Some of the key changes brought about by MiFID II include the following;

  1. The range of firms covered by MiFID II will be broadened as will the range of products, such as structured deposits and emission allowances.
  2. Significant changes to the business requirements which include but are not limited to the following: (i) additional restrictions on inducements by providers of independent advice and portfolio managers; (ii) additional client asset requirements; (iii) a widened scope for appropriateness tests; and (iv) more stringent requirements in relation to the provision of investment advice.
  3. The introduction of the organised trading facilities, a new regulated category of trading venue.
  4. Third country firms (firms outside the EEA) that wish to provide cross-border investment services within the EEA would be able to do so on receipt of a 'passport' under MiFID II to provide the services.
  5. MiFID II will also introduce a harmonised interpretation of sanctions across all EU Member States.
  6. On 7 February 2014, ESMA published an opinion on MiFID practices for firms selling complex products (ESMA/2014/146).

On 19 February 2014, the Council of the EU announced that COREPER has approved the final compromise texts on MiFID II.

The MiFID II proposals are expected to be approved by the Parliament on 15 April 2014.

1.11 Market Abuse and Criminal Sanctions

As highlighted in last quarter's update, COREPER II approved the agreement with the European Parliament on the directive on criminal sanctions for insider dealing and market manipulation. On 9 January 2014, the leading committee of the European Parliament for economic matters supported the proposition for criminal sanctions to tackle the abuse and manipulation of financial markets.

On 4 February 2014, the European Parliament approved the European Commission's proposal for a directive on criminal sanctions for market abuse (the "CSMAD Directive") with European Commissioners for Internal Market and Justice, Michel Barnier and Viviane Reding noting that "...the EU is sending a clear signal: there must be zero tolerance for manipulators in our financial markets. The EU's new market abuse framework will ensure that those who commit market abuse will face huge fines or jail across Europe".

Some of the key features of the CSMAD Directive are:

  • Common EU definitions of market abuse offences.
  • Common set of criminal sanctions across all Member States including fines and imprisonment of four years for insider dealing/market manipulation and two years for unlawful disclosures.
  • Legal persons can be held liable for market abuses.
  • Member States will be required to establish jurisdiction for offences committed in the Member State or by a national of the Member State.
  • Member States will be required to ensure that authorities are sufficiently trained to deal with highly complex cases and enforce the CSMAD Directive.

The CSMAD Directive is due to be published in the Official Journal in June 2014 after which Member States will have two years to transpose it into national law.

1.12 Reporting and Transparency: Securities Financing Transactions

On 29 January 2014, the European Commission published a legislative proposal for a regulation on reporting and transparency of securities financing transactions ("SFTs"). It sets out proposals for requirements for:

  • financial or non-financial counterparties of SFTs to report the details of SFT transactions to trade repositories;
  • UCITS management companies, UCITS investment companies and AIFMs to provide information to investors on their use of SFTs and other financing structures; and
  • counterparties seeking to engage in rehypothecation to ensure certain conditions are satisfied before they have the right to rehypothecation.

The legislative proposal follows the Commission's September 2013 communication on shadow banking, in which it announced that it was considering a legislative proposal on securities law intended to reduce the risks associated with SFTs.

1.13 Proposal for a Regulation on European Long-Term Investment Funds

The text of a Presidency compromise proposal on European long-term investment funds ("ELTIF") was published in the Council Register on 20 March 2014. The first European Parliament plenary session on it is on 15 April 2014.

It sets out a new type of collective investment framework which would permit investors to invest into a mixture of long-term assets (such as companies and projects) that require long term-capital. The ELTIF must be managed by an AIFM and will be required to comply with the new ELTIF regulations as well as AIFMD requirements and any specific requirements to the fund itself. As a result of compliance with these requirements, the manager would be able to raise capital from retail and institutional investors across Europe.


2.1 Anti-Money Laundering/Counter-Terrorist Financing

In early December 2013, the newly appointed Deputy Governor of the Central Bank (Mr Cyril Roux) stated that the Central Bank was going to continue focusing on designated persons' compliance with anti-money laundering ("AML") and counter-terrorist financing ("CTF") standards as the Financial Action Task Force ("FATF") is due to inspect Ireland's standards in 2016.

Following on from this, the Central Bank published its enforcement priorities and programme of themed reviews and inspections for 2014, both of which identified AML as a key focus area. The Central Bank will be specifically reviewing the risk mitigation and control frameworks put in place by firms in managing their AML risk and complying with AML and CTF provisions contained within the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010, as well as the relevant sectoral guidelines.

2.2 Central Bank: Enforcement Priorities for 2014

On 25 February 2014, the Central Bank published its enforcement priorities for 2014 emphasising the importance of enforcement within its risk-based regulatory framework (PRISM) which for the first time included credit unions. The priorities are published annually to promote compliance across all relevant sectors. Two of the prominent priorities are those across all sectors: namely fitness and probity obligations of the Central Bank Reform Act 2010 and AML/CTF compliance.

The Central Bank also indicated the enforcement priority areas in the following individual sectors:

  1. Banking and insurance
  2. Markets
  3. Credit unions
  4. Consumer protection

Across all sectors, the systems and controls environment is fundamental to the effective running of a business and the Central Bank will closely monitor these during 2014. The systems and controls environment in place must be robust and firms should carry out audits pre-Central Bank inspection.

Further, given that AML/CTF has featured on the Central Bank's enforcement priorities for a number of years as well as the impending inspection from the FATF in 2016, it is clear that the Central Bank will be heavily focused on monitoring regulated entities' compliance with the relevant provisions.

2.3 Central Bank: Programme of Themed Reviews and Inspections for 2014

On 25 January 2014, the Central Bank published its planned series of themed reviews and inspections for 2014 and indicated the main are (i) markets; (ii) AML compliance; and (iii) consumer protection. The key areas that the Central Bank is focusing on for investment firms are:

  1. Outsourcing of activities by fund administrators – the Central Bank will conduct an assessment of the risk posed to the valuation processes in scenarios where the net asset value calculation process is outsourced in part or full.
  2. Data integrity of regulatory returns – the Central Bank will examine the data contained in regulatory returns submitted by investment firms and fund service providers.
  3. Corporate governance of investment funds and fund managers – the Central Bank will focus on the corporate governance arrangements for investment funds and fund managers ensuring compliance and activity in line with such arrangements.
  4. Conduct of business for investment and stockbroking firms – the Central Bank intends to assess the arrangements of investment and stockbroking firms in regards the collection of data in order to satisfy the client categorisation and suitability requirements of MiFID.
  5. Client assets – the Central Bank will review compliance by investment firms with client asset requirements; the rights duties and responsibilities of investment firms when receiving and holding client funds and financial instruments arising from its investment activities.
  6. AML compliance – similar to the Central Bank's enforcement priorities, there is a strong focus on AML/CTF and the Central Bank intends to review the risk mitigation and control structures and frameworks in operation by all firms in managing their AML risk and complying with AML/CTF provisions.

2.4 ESMA's Guidelines on ETFs and Other UCITS issues

On 23 January 2014, the Central Bank issued a memorandum concerning two issues that have arisen in relation to the implementation of ESMA guidelines on exchange traded funds ("ETFs") and other UCITS issue published on 18 December 2012 (ESMA/2012/832).

With the publication of ESMA's consultation paper on Revision of the provisions on diversification of collateral in ESMA's guidelines on ETFs and other UCITS issues on 20 December 2013 a potential challenge could arise where investment funds had to comply with ESMA's initial guidelines (published on 18 December 2012) by 18 February 2014 when these guidelines, in particular paragraph 43(e), may change following the conclusion of the ESMA consultation (referred to at 2.5 below). This matter was raised with the Central Bank which advised that "in the light of that consultation it is reasonable for a UCITS money market fund, authorised before 18 February 2013, to delay its compliance with paragraph 43(e) of the ESMA guidelines until such time as ESMA has issued its feedback and concluded the consultation process".

Additionally, industry also engaged with the Central Bank with regard to paragraph 35 of the ESMA's guidelines (repeated in the UCITS Notice 8, Appendix A, paragraph 9(iv)). In particular, industry sought clarification as to the scope of transactions caught by the requirement to disclose revenues arising from efficient portfolio management techniques. In response to the industry submission the Central Bank have advised "a reasonable interpretation of the reference to "revenue" in Guideline 35(d), subject to any clarification which may be provided by ESMA, would be that it is applicable only to revenue from securities lending arrangements and repurchase/reverse repurchase agreements".

2.5 Final Report on Revision of Guidelines ETFs and other UCITS Issues

On 24 March 2104, ESMA published its final report (ESMA/2014/294) ("New Guidelines") following its December 2013 consultation on the collateral rules in the guidelines on ETFs and other UCITS Issues. This consultation was held to review the requirements in paragraph 43(e) of the Guidelines that collateral received by a UCITS should be diversified on a country/issuer basis and subject to a 20% issuer limit.

The key points are:

  1. Paragraph 43(e) of the Guidelines is replaced with the New Guidelines to reflect that any UCITS may be fully collateralised in government bonds of one issuer. (Note there was a possibility that ESMA would grant this facility only to UCITS money market funds.)
  2. UCITS availing of this facility will be required to diversify government bonds across at least six different issues and a maximum of 30% in any one issue.
  3. UCITS availing of this facility will be required to:

    1. make a prospectus disclosure on this facility to be fully collateralised in the government bonds of one issuer and list the government issuers to which they may be exposed above the standard 20% limit; and
    2. make a corresponding disclosure in the UCITS' annual report. This will be subject to a transition period before it will apply to existing UCITS.

In the case of the prospectus changes, the transition period will be 12 months from the application date of the New Guidelines (or earlier if the prospectus is being revised for any other reason). In the case of the accounts disclosure, this will apply only to accounting periods that end after the application date of the New Guidelines.

The new provisions will be translated and incorporated into the ESMA Guidelines on ETFs and other UCITS issues.

For further details please see our client update, ESMA Revises UCITS Collateral Rules.

2.6 Capital Requirements Regulation/Capital Requirements Directive IV

On 1 January 2014, the Capital Requirements Regulation ("CRR") and Capital Requirements Directive IV ("CRD IV") came into force. CRR and CRD IV set out enhanced requirements for quality and quantity of capital, a standard for liquidity and leverage requirements as well as other changes to rules on corporate governance, remuneration and the implementation of standardised reporting.

On 31 March 2014, the European Union (Capital Requirements) Regulations 2014 and the European Union (Capital Requirements) (No. 2) Regulations 2014 were signed into Irish law to give effect to CRD IV. Ireland is amongst the first wave of EU Member States to complete the transposition of CRD IV as well as CRR (which is directly applicable and does not require transposition).

2.7 ESMA Launches One-Stop Shop for EU Regulated Investment Information

ESMA has established new consolidated registers on its website in accordance with Directive 2010/78/EU. These list the information currently published on the websites of the national competent authorities ("NCAs") for the securities regulation of 31 EEA Member States. It provides the following information:

  1. a list of investment firms authorised under Article 5 of MiFID;
  2. a list of prospectuses, supplements and certificates of approval that have been approved under the Prospectus Directive;
  3. a list of administrative measures and sanctions imposed upon investment firms under Article 51 of MiFID;
  4. a list of sanctions imposed on MiFID investment firms under Article 14 of the Market Abuse Directive (2003/6/EC); and
  5. a list of management companies authorised under Article 6 of the UCITS Directive.

The consolidated registers have been set up with the assistance of the EEA NCAs. This is an ongoing process and ESMA will continue to work with the NCAs to ensure that a complete set of data for all NCAs is available in the consolidated registers.

2.8 ESMA: AIFMD MoUs Signed by the EU Authorities

On 20 February 2014, ESMA updated its table showing the state of play of MoUs signed by EU national supervisors with non-EU regulators worldwide in respect of AIFMD. The AIFMD MoUs are co-operation agreements that allow the exchange of information between EU and non-EU supervisors, enabling non-EU fund managers to market AIFs within the EU.

2.9 Irish Management Company Managing Non-Irish Funds

Given an increasing interest in Irish management companies seeking to manage non-Irish funds the industry has been engaging with the Central Bank on this matter. In particular, industry were keen to understand the Central Bank's requirements where an Irish UCITS management company is appointed to a non-Irish UCITS fund, where it is proposed that some of the administration activities will be carried out by the same entity which is appointed as depositary to the UCITS. The Central Bank has now set out its requirements in this regard. The Central Bank will consider proposals on a case by case basis in order to ensure that there is sufficient separation of functions as required and that conflicts of interest can be sufficiently addressed, identified and managed.

2.10 ESMA: Draft ITS on EuVECA and EuSEF Regulations

On 20 February 2014, ESMA published the following:

  1. Draft implementing technical standards ("ITS") (dated 11 February 2014) to determine the format of notification under Article 16 of the European Venture Capital Funds Regulation (ESMA/2014/160) ("EuVECA Regulation"). Article 16 concerns one regulator notifying another about the registration of a manager of a qualifying venture capital fund ("VCF").
  2. Draft ITS (dated 11 February 2014) to determine the format of notification under Article 17 of the European Social Entrepreneurship Funds Regulation (ESMA/2014/161) ("EuSEF Regulation"). Article 17 concerns one regulator notifying another about the registration of a manager of a qualifying EuSEF. The European Commission still has to approve the draft ITS.

On 26 March 2014, ESMA published a Q&A on the application of the EuSEF and EuVECA Regulations. The Q&A is aimed at promoting common supervisory approaches and practices in the application of the EuSEF and EuVECA Regulations by competent authorities across the EU.

2.11 Central Bank Requirements: Transactions with Connected Parties

In May 2013, the Central Bank included new requirements in the UCITS and Non-UCITS notices requiring the board of directors of investment companies to include a confirmation in relation to transactions with connected parties in the annual and where relevant, the half-yearly reports. These requirements are also reflected in the AIF Rulebook. On 21 March 2014, the IFIA industry technical committee circulated a paper to assist funds prepare procedures around these requirements.

2.12 Resident Money Market and Investment Funds Returns

The Central Bank published the following documents concerning the resident money market and investment funds ("MMIF") returns which take the place of the OFI1 and funds annual survey of liabilities returns from April 2014:

  • MMIF Online Reporting Validation Guidelines;
  • MMIF Notes on Compilation;
  • MMIF Reporting Form;
  • MMIF Worked Examples 2.0 – Derivatives, Securities Borrowing/Lending and Overdrafts; and
  • MMIF In-House Validations.

2.13 Central Bank Consultation Paper: Handling of Protected Disclosures

On 19 March 2014, the Central Bank issued a consultation paper on the Handling of Protected Disclosures by the Central Bank of Ireland (CP79). Under the Central Bank (Supervision and Enforcement) Act 2013 provisions have been introduced regarding the making of protected disclosures regarding alleged breaches of financial services legislation to the Central Bank by whistleblowers. The paper seeks the views of stakeholders in relation to the new arrangements and policies put forward by the Central Bank in the processing and handling of these protected disclosures.

Responses are requested by 19 June 2014.

2.14 Central Bank Consultation Paper: Guidelines on LCR Calculation for the Interim Observation Period

On 19 March 2014, the Central Bank also issued a consultation paper on Guidelines on LCR Calculation (CP80) (Closing date: 16 April 2014). The consultation paper signals the Central Bank's approach to the calculation of the liquidity coverage ratio ("LCR") for institutions for an interim observation period until such time as the Article 460 of CRR liquidity delegated act comes into force.

2.15 FSO Bi-Annual Review

On 26 February 2014, the Financial Services Ombudsman ("FSO"), William Prasifka published the bi-annual FSO review for the second half of 2013. For the first time, under the powers provided by the Central Bank (Supervision and Enforcement) Act 2013, the FSO identified regulated financial service providers (categorised as within either the investment sector, banking sector or insurance sector) who had at least three complaints against them which were either substantiated and/or partly substantiated.

The review also provides analysis and figures for complaints received in 2013 which for the first time since 2007 are down on the previous year.


3.1 FATCA Update

Ireland signed an intergovernmental agreement ("IGA") with the US in 2012 and it is intended that Irish regulations will be passed imminently so that the IGA is fully implemented in Ireland by the US Foreign Account Tax Compliance Act ("FATCA") start date of 1 July 2014.

The purpose of FATCA is to enable the US tax authorities to gather information on the income of US persons from funds and financial institutions around the world. FATCA will therefore affect Irish investment funds and add to their existing compliance obligations.

Maples and Calder have published updates on the application of FATCA to funds established in both Ireland the Cayman Islands, the most recent of which are:

Maples and Calder works closely with our affiliate MaplesFS to provide a range of FATCA related services to clients.


Unless it falls within an exempt category, an Irish fund will need to register with the US Internal Revenue Service ("IRS") and report to Irish Revenue Commissioners ("Revenue") details of interests held by US persons and non-US entities in which US persons have a controlling interest ("US Reportable Account"). The sanction for failing to comply is that a 30% withholding tax may be imposed on payments to the fund from US sources.


A fund may be exempt from FATCA registration and reporting if it falls within certain narrowly drawn exempt categories. These include pension funds, "Restricted Funds" (as defined in FATCA) and regulated "Collective Investment Vehicles" (as defined in FATCA). For example the latter exemption only applies if 100% of the interests in the fund are held by or through other financial institutions that themselves carry out the required FATCA reporting. It is considered to be challenging for many funds to meet the conditions for exemption.

If a fund is not exempt, it must register with the IRS (see below) and report all US Reportable Accounts that are not listed on a recognised stock exchange or held through intermediaries that are themselves FATCA reporting.

Most funds will need to engage their administrator or other appropriate third party to undertake the due diligence and reporting. Detailed procedures are laid down in Annex I of the IGA. Irish funds must submit a return to Revenue on or before 30 June each year, starting in 2015. If an Irish fund has no US Reportable Accounts, it must submit a nil return to Revenue.

The due diligence procedure for new accounts opened on or after 1 July 2014 will need to be in place by that relevant date, and due diligence of existing accounts opened before that date should be completed by 30 June 2015 for high value accounts and 30 June 2016 for all other accounts.

GIIN registration

An Irish fund that is not exempt should register with the IRS on their FATCA internet portal in order to obtain a Global Intermediary Identification Number ("GIIN") and appear on a list of foreign financial institutions ("FFIs") maintained by the IRS. The GIIN would be provided to US counterparties who would be entitled to pay the Irish fund free of FATCA withholding tax by verifying its status on the FFI list.

The Irish fund must register before the end of 2014 so that it appears on the FFI list published on 1 January 2015. However, as a practical matter, it may choose to register sooner and should take advice on that. In the meantime, from 1 July 2014 when FATCA withholding first applies, an Irish fund can self-certify its status on IRS Form W-8BEN-E to avoid being withheld upon by US counterparties.

Responsible officer

When registering for a GIIN an Irish fund would need to nominate a "responsible officer" as a point of contact to receive information related to the registration. This is simply an individual with authority under Irish law to confirm the Irish Reporting FI's status and submit the information provided on its behalf. In the case of a company or fund, the responsible officer could be one of the directors unless registration has been validly delegated to a third party.

Action points

Given the impending deadlines and preparation required to comply with FATCA, directors of funds should:

  1. engage their legal advisers to ascertain the scope of their FATCA obligations;
  2. enquire of existing service providers as to whether they will undertake the required FATCA registration, due diligence and reporting and, if so their proposed fee structure; and
  3. review and, if necessary, amend their prospectus, subscription and constitutional documentation.

If clients require legal advice about FATCA in Ireland, Maples and Calder has leading expertise on the relevant provisions, having established a FATCA team which has worked closely with the Irish government over the past two years.

For further information and assistance on FATCA matters, please speak with your usual Maples and Calder contact.


4.1 T+2 Settlement for UK and Irish Markets

On 5 February 2014, Euroclear UK & Ireland published a new webpage and FAQs relating to the standard settlement cycle for the UK and Irish markets being shortened from T+3 to T+2. Under the new settlement cycle, securities will settle two business days after trade date rather than three.

The FAQs clarify that the new settlement cycle will apply to transferable securities traded on or after 6 October 2014 on:

  • UK or Irish based recognised investment exchanges ("RIEs");
  • multilateral trading facilities ("MTFs"); and
  • organised trading facilities ("OTFs"),

where those trades settle in Euroclear UK & Ireland's CREST system. Further information on specific asset classes will be published in due course. A December 2013 press release states that OTC transactions will be exempt from the T+2 regime, but firms may also choose to settle their OTC activity on the same T+2 basis.

The move to T+2 in the UK and Irish markets is consistent with the latest version of the European Commission's proposed regulation on improving securities settlement in the EU and on central securities depositories regulation, which aims to harmonise EU securities settlement cycles from January 2015.

4.2 Legal Entity Identifiers

The Irish Stock Exchange ("ISE") has issued over 1,000 pre-Legal Entity Identifier ("LEI") codes since launching its online application service through www.ISEdirect.ie last autumn. A LEI is a global reference code which uniquely identifies each legal entity that engages in a financial transaction and is a requirement under EMIR. The ISE was only the sixth organisation worldwide to be endorsed by the Regulatory Oversight Committee ("ROC"), the global body of regulators which oversees adherence to the LEI standards. The Central Bank, which has sponsored the ISE as the pre-LEI provider in Ireland, is a member of the ROC. To date, Maples and Calder have issued close to 300 LEIs on behalf of its clients.

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.