1. APPROACHING DEADLINES

Approaching deadlines
Q4 2022 19 October 2022 Return Deadline: Fund management companies must submit their outsourcing registers to the Central Bank. (Please see Section 6.4).
1 December 2022 Deadline imposed by the Central Bank on Irish management companies to avail of the fast-track filing process for the filing of pre-contractual documentation which have been updated to address the SFDR Level 2 Regulations or other SFDR-related changes. For further details on this fast-track process, please refer to our briefing available here.
27 December 2022 Deadline for putting in place new Standard Contractual Clauses (SCCs) to govern transfers of personal data outside of the EEA for existing contracts1.
30 December 2022 Deadline for funds which consider principal adverse impacts of investment decisions on sustainability factors to update prospectuses to include disclosures required under Article 7 of the SFDR. Amendments to pre-contractual documentation to address these disclosure obligations fall within the scope of the Central Bank's fast track filing process which closes on 1 December 2022.
31 December 2022 UCITS/RIAIF Multi-Manager Funds established prior to 20 December 2021 must update their performance fee calculation methodology to align with ESMA's Q&A of July 2021 on Performance Fees in Multi-Manager UCITS/RIAIFs.
31 December 2022 Fund management companies should ensure that any existing Cloud Outsourcing Agreement is updated to comply with ESMA's Guidelines on Outsourcing to Cloud Service Providers.
TBC Q4 2022 The Central Bank's new template for the Beneficial Register return will become available, (the precise date will be sent to CFVs directly) seeking information on the PPS number (or Central Bank reference number where applicable) of the beneficial owner.
Q1 2023 1 January 2023 Funds falling within the scope of Article 8 or Article 9 of the SFDR must incorporate and publish an "ESG" annex into their prospectus/fund supplements which satisfy the relevant regulatory technical standards published under the SFDR. Amendments to pre-contractual documentation to address these disclosure obligations fall within the scope of the Central Bank's fast track filing process which closes on 1 December 2022.
1 January 2023 The annual reports of any funds falling within the scope of Article 8 or Article 9 of the SFDR published on or after 1 January 2023 must incorporate an "ESG" annex into their annual report which satisfies the relevant regulatory technical standards published under the SFDR.
1 January 2023 Where applicable, disclosure obligations in respect of the four remaining environmental objectives listed in Article 9 of the Taxonomy Regulation begin to apply. In addition, the disclosure obligations set down in the Taxonomy Complementary Climate Delegated Act begin to apply. (See Section 3.1 and Section 3.6 below for further details)
1 January 2023 All UCITS funds which are made available to EEA retail clients must prepare and publish a PRIIPS Key Information Document from this date.
TBC Q1 2023 Individual Questionnaires for a holder of a Pre-Approved Control function will no longer be submitted via the Central Bank's Online Reporting System (ONR), but will instead be submitted via the Central Bank Portal.

2. UCITS & AIFMD

2.1 Publication of revised ESMA Q&As on the UCITS Directive and on AIFMD

On 20 July 2022, the European Securities and Markets Authority (ESMA) published an updated version of its Q&A on the application of the UCITS Directive and its Q&A on the application of the AIFMD (Q&As).

The revised Q&As include two new questions on depositaries and one new question on delegation, all of which address the same issues in respect of both UCITS and the AIFMD.

In the first question on depositaries, ESMA clarifies that reconciliation frequency depends not only on the dealing frequency of the relevant AIF or UCITS, but also on any trade which occurs even outside the dealing frequency. If an AIF or UCITS with a weekly dealing frequency trades on a daily basis, daily reconciliations are required.

The second question on depositaries addresses reconciliation frequency in the context of a tri-party collateral manager which is not the depositary. In this case the tri-party collateral manager is appointed by the asset manager and also needs to be the delegate of the depositary. The tri-party collateral manager is required to transmit the end-of-day positions on a fund-by-fund, or compartment-by-compartment, basis. This information allows the depositary to record end-of-day positions, and to verify that the quantity of the identified financial instruments recorded in the accounts opened in its books matches the quantity of the identified financial instruments held in custody by the third party.

The third new question, which addresses the responsibility to ensure compliance with the rules governing marketing communications under the Cross Border Distribution Regulation, is addressed in more detail in Section 4.1 below.

The Q&A on the Application of the UCITS Directive can be accessed here.

The Q&A on the Application of the AIFMD can be accessed here.

2.2 Opinion of the European Central Bank on proposed amendments to the AIFMD and UCITS frameworks

In November 2021, the European Commission published a package of legal acts including proposals to amend both the UCITS and AIFMD frameworks in a number of key areas, including delegation arrangements, liquidity risk management, supervisory reporting, loan origination AIFs, supervisory reporting and depositary and custody services (Proposed AIFMD and UCITS Revisions), which were discussed in our previous Quarterly Legal Update at Section 2.5 which is available here2.

On 9 August 2022, the European Central Bank (ECB) published an own initiative opinion on the Proposed AIFMD and UCITS Revisions (Opinion).

The ECB welcomed the proposal to fill certain regulatory gaps in the AIFMD, to ensure a coherent supervisory approach to the risks that AIFs pose to the financial system, and to provide a high level of investor protection while facilitating integration into the EU financial market.

While the ECB also supported the proposal to better align the requirements of the AIFMD and the UCITS Directive on issues relevant to both, such as delegation arrangements and custodial services, its Opinion focuses on the proposed amendments to the AIFMD framework. In this regard, the Opinion notes that the proposed revisions should also aim to limit the liquidity mismatch between the assets and liabilities of AIFs, by means of measures that specifically target either assets or liabilities and also calls on the European Commission to consider requiring AIFMs to select several (and not only one) liquidity management tools which can be used by open-ended AIFs. The

ECB also suggest that data of individual AIFs filed with the competent authorities should be made available by ESMA to the ECB and other relevant ESCB central banks to assist them in fulfilling their tasks including defining and implementing monetary policy and contributing to the stability of the financial system.

The Opinion can be accessed here.

2.3 European Union (Undertakings for Collective Investment in Transferable Securities) (Amendment) (No.2) Regulations 2022

The European Union (Undertakings for Collective Investment in Transferable Securities) (Amendment) (No.2) Regulations 2022 (Amending UCITS Regulations) came into operation on 12 September 2022.

The Amending UCITS Regulations transpose Commission Delegated Directive (EU) 2021/1270 into Irish law and require Irish management companies to:

  • take sustainability risks into account when conducting due diligence on investments;
  • where relevant, consider the principal adverse impacts of investment decisions on sustainability factors;
  • update existing risk management procedures to incorporate the assessment of material sustainability risk which may arise for funds under management;
  • identify conflicts of interests which arise as a result of integration of sustainability risks in their processes, systems and internal controls;
  • take sustainability risk into account in their organisational structure;
  • ensure that their senior management assumes responsibility for the integration of sustainability risks in the investment and risk management processes; and
  • ensure that they retain adequate resources and expertise for the integration of sustainability risk.

A copy of the Amending UCITS Regulations is available here. Corresponding rules have been imposed on Irish domiciled AIFMs since 1 August 2022 when Commission Delegated Regulation (EU) 2021/1255 took effect.

Key Action Points Irish domiciled UCITS management companies and where relevant, Irish domiciled self-managed UCITS funds, should review and update internal investment due diligence, risk management and conflicts of interest arrangements, as well as their internal organisational structures to ensure compliance with the Amending UCITS Regulations.

3. SUSTAINABLE FINANCE

3.1 Publication of Taxonomy Complementary Climate Delegated Act in Official Journal

On 15 July 2022, Commission Delegated Regulation (EU) 2022/1214 of 9 March 2022 amending Delegated Regulation (EU) 2021/2139 as regards economic activities in certain energy sectors and Delegated Regulation (EU) 2021/2178 as regards specific public disclosures for those economic activities (Taxonomy Complementary Climate Delegated Act) was published in the Official Journal of the European Union.

The Taxonomy Complementary Climate Delegated Act extends the EU Taxonomy framework under Regulation (EU) 2020/852 (the Taxonomy Regulation) to provide for certain economic activities relating to natural gas and nuclear energy to be classified as taxonomy-aligned provided that certain criteria have been satisfied.

The Taxonomy Complementary Climate Delegated Act entered into force 20 days after its publication in the Official Journal, and will apply from 1 January 2023.

Footnotes

1 In a recent development on the EU-U.S. Data Privacy Framework, President of the Unites States, Joe Biden, signed an executive order on 7 October 2022 on enhancing safeguards for United States Signals Intelligence Activities which outlines the steps which the United States will take to safeguard personal data under the EU-U.S. Data Privacy Framework facilitating transatlantic data flows between Europe and the United States. The steps outlined in the executive order will form the basis for the European Commission's assessment in a new adequacy decision. On the same day, the European Commission published a Questions and Answers document on the EU-U.S. Data Privacy Framework.

2 For further information on the European Parliament's draft report and the Council's position paper on the Proposed AIFMD and UCITS Revisions, please refer to Section 2.3 of our previous Quarterly Legal and Regulatory Update

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