While funds and their management companies may still be catching their breath after a particularly challenging year in 2019 dominated largely by uncertainty around Brexit, 2020 is shaping up to be another busy year for industry stakeholders.
What follows is an overview of some key dates which should be appearing in your compliance calendar for 2020 and a synopsis of some of the legal developments we can expect in the next twelve months.1
|Date||Matter||Action to be taken|
|1 January 2020||Benchmarks Regulation
With the exception of the use of "critical" benchmarks and "third country" benchmarks (which can continue to be used until 31 December 2021 without the relevant benchmark administrator or benchmark appearing on the ESMA register), UCITS management companies and AIFMs2 must ensure, with effect from 1 January 2020, that funds under management only use those benchmarks whose administrators appear on the register maintained by ESMA. This register is accessible from https://registers.esma.europa.eu/publication
|If not already done, check the ESMA register to confirm that the relevant EU benchmark administrator is authorised or registered with ESMA.|
|31 January 2020 at 11pm||United Kingdom expected to leave the
At the time of writing, it is widely expected that the UK will leave the European Union at 11pm on 31 January 2020 under the terms of an agreed "withdrawal agreement" (referred to as a "soft Brexit"), at which point it will become a "third country" for the purposes of European law. During the "transitional period" set down in the withdrawal agreement (which period is currently envisaged to expire on 31 December 2020), EU law will continue to apply in the United Kingdom and the status quo in the sphere of financial services, including the EU passporting regime, will continue.
During this period, focus will turn to negotiating the terms of the future relationship between the UK and the EU in the financial services arena. As agreed in the political declaration on the future relationship between the parties, this will involve both parties conducting equivalence assessments on the others' legislative and supervisory framework in certain areas of EU financial services law. For those areas which do not have an existing equivalence framework, it remains unclear as to what form the future relationship between the parties will take and what type of market access might be agreed by the end of the transition period. While Ursula Van Leyden, President of the European Commission, last week described the EU as being ready to negotiate "a partnership that goes well beyond trade and is unprecedented in scope"3, she also noted that a fully comprehensive partnership covering all areas would not be possible without an extension of the transition period beyond 2020.
While wholesale changes to prospectus disclosures should not be required in the event of a "soft Brexit" at the end of this month, clients are advised to ensure that they can continue to implement their investment strategy based on existing disclosures notwithstanding that the UK is no longer a member of the European Union. By way of example only, if a fund manager currently relies on reference to investment in EU equities in the fund's investment policy in order to gain exposure to UK equities, the fund documentation may require updating to expressly reference investment in UK equities.
ESMA also notes in its work programme for 2020 that it intends to build a common supervisory approach on the national competent authorities handling of Brexit relocation and beyond. It also intends to establish peer reviews of how EU 27 competent authorities have handled the relocation of UK firms in light of Brexit. Its work programme also confirms that it will continue monitoring relocations to the EU27 until six months after the UK's withdrawal from the EU to foster a common approach in handling the authorisation requests.
|If necessary, review fund documentation to ensure no changes are required in the event of a soft Brexit.|
|31 January 2020||Fitness & Probity Filings for UCITS
management companies and AIFMs
Under its fitness and probity regime, the Central Bank requires each regulated financial service provider ("RFSP") to submit a confirmation to the Central Bank on an annual basis which lists all individuals performing pre-controlled functions ("PCF") and confirms that each PCF complies with those standards and continues to abide by those standards.
In its Dear CEO Letter to all RFSP in March of last year, the Central Bank emphasised the obligation to conduct due diligence on an ongoing basis to ensure that individuals performing any controlled function (including PCF) continue to comply with the fitness and probity regime.
|F&P confirmation to be filed with the Central Bank by 31 January 2020|
|31 January 2020||Annual confirmation of ownership of UCITS management companies and AIFM||Filing of confirmation of ownership to be made with Central Bank by 31 January 2020|
|19 February 2020||Issue and filing of annual KIID
UCITS management companies must issue revised KIID containing updated performance data for the period ended 31 December 2019 and incorporating any other required revisions and file same with the Central Bank no later than 19 February 2020. Where appropriate and to the extent not already incorporated, UCITS management companies may wish to include any necessary disclosures relating to the UCITS' use of a benchmark required in light of the publication of the revised ESMA Q&A on UCITS in March 2019. Further information is set out below under the heading of "Review of UCITS fund documentation relating to use of a benchmark".
|Revised KIID to be issued and filed with the Central Bank by 19 February 2020|
|28 February 2020||Fund Profile Return
A fund profile return containing information for each sub-fund or single strategy fund authorised by the Central Bank as at 31 December 2019 must be filed with it via its ONR system no later than 28 February 2020. The Central Bank has issued guidance to assist in making these filings.
|Fund Profile Return to be filed with the Central Bank on or before 28 February 2020.|
|29 February 2020||Fitness and Probity Filings for Investment
Please refer to "Fitness and Probity Filings for UCITS management companies and AIFMs" for further information.
|F&P confirmation to be filed with the Central Bank by 29 February 2020|
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1. This briefing does not include filing requirements in respect of any filing where the filing date is determined with reference to the relevant entity's annual accounting date (such as the filing of annual and semi-annual financial statements with the Central Bank) nor does it address any tax-related deadlines to which funds and fund management companies may be subject. Periodic reviews of matters such as the risk management framework, business plan and policies and procedures of fund management companies as well as any other actions required to be taken under the Irish Funds Corporate Governance Code are also excluded from the remit of this briefing.
2. References in this briefing to UCITS management companies and AIFM should be construed as also referring to self-managed UCITS investment companies and internally managed AIF where the context so requires.
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.