Bringing to a conclusion its 3 year consultation process on Fund Management Company effectiveness, the Central Bank yesterday published its feedback statement on CP86 together with final guidance. CP86 applies to fund management companies ("FMCs"), which include self-managed UCITS and QIAIFs as well as UCITS management companies and AIFMs, which are authorised by the Central Bank.
The feedback statement marks a softening of the Central Bank's original position set out in the consultation, in particular the location of EEA resident directors/designated persons, which has been reduced from two thirds to 50%; a relaxation of the Irish residency requirement for designated persons and a longer timeframe for implementation. The feedback statement has widely been welcomed by industry and provides greater certainty to managers post-Brexit. We set out below a summary of the key points in the feedback statement.
Irish Residency Requirements
FMC's will be required to ensure that the Central Bank has access to its people and records and that there are clear, effective channels of communication with the Central Bank. To achieve this, the Central Bank is proposing the following changes to the Irish residency rules:
|FMCs with a Low PRISM Impact*||FMCs with a Medium Low PRISM Impact or above**|
|2 Irish resident directors;||3 Irish resident Directors or 2 Irish resident directors and one Irish resident designated person;|
|Half of its directors must be resident in the EEA; and||Half of its directors must be resident in the EEA; and|
|Half of its managerial functions must be performed by at least 2 EEA resident designated persons||Half of its managerial functions must be performed by at least 2 EEA resident designated persons.|
* Generally all self-managed funds are considered to
be low risk by the Central Bank.
** Generally this will only apply to an external manager and should not impact the fund.
The old requirement for all designated persons to be Irish resident will be relaxed and replaced with the requirements set out above.
Record Keeping and Access to Information
FMCs will be required to keep all of their records in a way that makes them immediately retrievable in or from Ireland. In the context of these rules, the Central Bank is of the view that 'immediately' means documentation requested before 1pm (Irish time) should be provided to the Central Bank on the same day and documentation requested after 1pm (Irish time) should be provided to the Central Bank before 12 noon on the following day on which the Central Bank is open for business. FMCs will also be required to provide the Central Bank with a dedicated email address that should be monitored at least daily.
Implementation and Timelines
The Central Bank has confirmed that divergence from its guidance will not be considered a regulatory breach, but that it will have regard to the guidance when considering whether an FMC has complied with its regulatory obligations.
The Central Bank has published guidance for FMCs and intends to issue amended Central Bank UCITS and AIF Regulations next year reflecting the new requirements. Existing FMCs are required to comply with the new rules from 1 July 2018. Any applications for new FMCs submitted after 1 July 2017 will have to comply with the new requirements from this date.
All FMCs will need to review their current structures for compliance with the new rules, however, the softening of its position will mean that in practice fewer FMC Boards will be impacted by the requirements and in addition will now have a longer timeframe for compliance.
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