Ireland: Regulatory update

In a speech delivered in October 2017, the Central Bank confirmed that it strongly supported the work of the European Securities and Markets Authority (ESMA) at fostering consistency in the authorisation and supervision of entities, activities and functions proposing to relocate from the United Kingdom. Consistent with this position, in authorising applicants relocating from the UK, the Central Bank now looks for applicants to demonstrate compliance with the provisions of the ESMA Opinion of 13 July 2017 to support supervisory convergence in the area of investment management in the context of the United Kingdom withdrawing from the European Union.

The European Union (Markets In Financial Instruments) Regulations 2017 which were published in July of last year with the purpose of transposing Directive 2014/65/EU into Irish law have been revised by the publication of the European Union (Markets in Financial Instruments) (Amendment) Regulations 2017, with the majority of changes being very minor in nature.

In response to the European Supervisory Authorities joint statement in November 2017 in respect of the requirement under the margin regulatory technical standards to exchange variation Margin for physically settled FX forwards from 3 January 2018, the Central Bank issued a statement on 18 December 2017 confirming that it would apply its risk-based supervisory powers in the day-to-day enforcement of applicable legislation in a proportionate manner. Although not expressly stated, it may be inferred from the Central Bank’s statement that investment funds do not need to comply with the relevant requirement to exchange variation margin for physically-settled FX forwards. A copy of the Central Bank’s statement is available on the Central Bank’s website.

With effect from 1 December 2017, the Central Bank has introduced a new “authorisation” levy which will apply to every Irish domiciled investment fund that is authorised and every sub-fund that is approved by the Central Bank. This is a once-off levy which will be payable by the relevant fund within 28 days of the issue of the levy notice by the Central Bank. Details of the applicable rates, together with further information relating to the levy is available from the Central Bank’s webpage, which is accessible here.

In December 2017, a second edition of the Central Bank Investment Firms Regulations was signed into law and took effect from 3 January 2018. The revised Regulations are intended to consolidate all of the requirements applicable to certain investment firms, fund service providers and market operators and include changes related to MiFID II, and the Investor Money Regulations (IMR) have been incorporated, with certain matters relating to the client assets regime and the IMR which to date have been addressed in guidance have now been put on a legislative footing in the revised Regulations. The Central Bank has confirmed that they will issue guidance on Part 6 (relating to Client Asset Requirements) and Part 7 (Investor Money Requirements) but that pending the issue of such guidance, the current guidance will continue to apply.

It has also published a revised version of its Q&A on investment firms available on the Central Bank’s website.

The Central Bank issued a number of revised Q&A on Undertakings for Collective Investment in Transferable Securities (UCITS) and the Alternative Investment Fund Managers Directive (AIFMD), the most recent of which are the 28th edition of the Central Bank Q&A on AIFMD and the 22nd edition of the Central Bank Q&A on UCITS. The revised editions published in the period under review provide additional guidance on the prospectus disclosure requirements applicable to UCITS and alternative investment funds (AIFs) under the Benchmarks Regulation, set down regulatory considerations to be complied with by depositaries of UCITS and AIFs when acquiring Chinese shares through the Shanghai-Hong Kong Stock Connect and the Shenzen-Hong Kong Stock Connect and address the application of the Key Information Documents for Packaged Retail and Insurance - Based Investment Products (PRIIPs) Regulation to AIFs.

In late December 2017, the EU (Securities Financing Transactions) Regulations 2017 (the “Irish SFT Regulations”) were signed into Irish law. The purpose of these regulations is to give full effect to the SFT Regulation. The Irish SFT Regulations designate the Central Bank as the competent authority in Ireland for the purposes of the SFT Regulation and grant it with some far-reaching powers in order to monitor compliance with the provisions of the SFT Regulation and the Irish Regulations, including a right of access, inspection and questioning. The Irish SFT Regulations also grant the Central Bank with certain enforcement powers and sets down the administrative sanctions which it may impose for infringements of the SFT Regulation. They also impose obligations on in-scope firms to ensure that there are appropriate whistleblowing arrangements in place to allow employees to report actual or potential infringements of the SFT Regulation.

The EU PRIIPs Regulations (the “Irish PRIIPs Regulations”) were also signed into law in late December 2017. These Regulations, which are intended to give full effect to the PRIIPs Regulation, designate the Central Bank as the competent authority in Ireland for the purposes of the PRIIPs Regulation and set down the sanctions which may be imposed by the Central Bank for infringements of the PRIIPs Regulation. The Irish PRIIPs Regulations also require regulated financial service providers, including UCITS and AIFM and those regulated firms selling PRIIP to put in place whistleblowing arrangements to allow their employees to report actual or potential infringements of the PRIIPs Regulation.

Author: Donnacha O’Connor, Partner at Dillon Eustace