1.1 Are funds that are offered to the public required to be registered under the securities laws of your jurisdiction? If so, what are the factors and criteria that determine whether a fund is required to be registered?
Undertakings for collective investment in transferable securities ("UCITS") are the most common category of Irish fund that are offered to the public. UCITS are EU-based regulated investment funds that are available for public participation. For an Irish UCITS to be offered to the public it must firstly be authorised by Ireland's regulatory authority, the Central Bank of Ireland (the "CBI"). Once a UCITS has been authorised by the CBI, it is automatically registered in Ireland and can be marketed to the Irish public.
In order for the UCITS to be marketed in other jurisdictions, such as Member States of the EU ("Member States"), it must submit a passporting notification to the CBI in respect of the relevant Member State with supporting documentation including, inter alia, the relevant key investor documents ("KIIDs"), annual financial statements and the formal passporting notification. Once the passporting notification has been reviewed and there are no comments from the CBI or the local regulator of the Member State(s) that the UCITS is proposed to be marketed in, the UCITS fund can be offered in that Member State(s). UCITS funds benefit from this passporting notification process for Member States on the basis of the marketing passport under the UCITS Directive, which allows UCITS authorised in one Member State to be sold cross-border in another Member State without any additional authorisation processes to be completed.
There is another type of retail fund that may be offered to the public and registered in Ireland, known as a retail investor alternative investment fund ("RIAIF"), which is a sub-category of alternative investment fund ("AIF"). In essence, an AIF is any fund that is not a UCITS. However, as RIAIFs are not as commonly authorised or widely marketed as UCITS, the focus of this section is on UCITS.
1.2 What does the fund registration process involve, e.g., what documents are required to be filed?
The CBI has a prescribed authorisation process that all UCITS applicants must comply with. As part of the UCITS authorisation process, there are a number of documents that are required to be filed with the CBI either for review or as confirmation of the UCITS' compliance with applicable regulatory requirements.
The central document in the application is the prospectus. This document is submitted for prior review and comment by the CBI. Any comments raised during the application must be addressed to the CBI's satisfaction before the UCITS can be authorised. In addition, should the UCITS propose to invest in certain asset types or instruments such as contracts for difference, binary options or contingent convertible bonds, then the CBI will require supplementary materials to be provided as part of the application, such as model portfolio information, due diligence on the underlying portfolio and evidence to support the view that the proposed investment portfolio is suitable, taking into account the CBI's requirements. The review process with the CBI, once the documents have been drafted, can take two to four months depending on the complexity of the strategy of the proposed UCITS.
As part of the authorisation process, there are other documents that are submitted to the CBI in a final executed format. Such documents are not subject to prior review and include, inter alia, the management agreement (where a management company is appointed), depositary agreement, investment management agreement, administration and distribution agreements, KIIDs, risk management process (where the UCITS proposes to use financial derivative instruments ("FDIs")) and various confirmations that the relevant documentation meets the CBI's requirements.
As mentioned above, a management agreement may be put in place where a management company is appointed to a UCITS. It is not a requirement for a UCITS to appoint a management company in Ireland. Where a UCITS does not appoint a management company it is referred to as a self-managed investment company ("SMICs"). Where a UCITS is a SMIC, it is required to prepare a detailed corporate governance and oversight document known as a business plan that is filed with the CBI for prior review and commentary before the UCITS is authorised. In light of the additional corporate governance, oversight and time commitment obligations that the CBI imposes on UCITS, for new UCITS, the externally managed model has become a predominant model within the industry in Ireland as it allows the UCITS to relinquish compliance with many of these requirements and have them sit with the Management Company.
1.3 What are the consequences for failing to register a fund that is required to be registered in your jurisdiction?
If a fund is not registered as a UCITS, it cannot hold itself out as this type of regulated entity. From a commercial perspective the fund then does not benefit from the UCITS marketing passport and will not be able to avail of the global recognition that UCITS funds enjoy as the gold standard investment fund within the EU financial services community. If a fund holds itself out as a UCITS and it is not authorised as such, then a number of authorities, in particular the CBI, have a range of prohibitory powers such as enforcement, sanctions and fines that can be applied to the fund.
1.4 Are there local residency or other local qualification requirements that a fund must meet in order to register in your jurisdiction? Or are foreign funds permitted to register in your jurisdiction?
As mentioned in question 1.2 above, Irish domiciled UCITS must go through an authorisation process with the CBI. For UCITS domiciled in other Member States, as set out in question 1.1 above, these UCITS must make a passporting notification to their home state regulator who liaises with the CBI. Once there are no outstanding comments from the relevant regulatory authorities, the UCITS can be offered to the public in Ireland.
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Originally published by ICLG
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