Publication | 12月 2019
In September, the Central Bank of Ireland published CP130; a consultation paper which outlines its proposed framework for dealing with errors in investment funds. The proposal follows an observation from the International Monetary Fund (IMF) in April 2014 as part of its review of Ireland’s compliance with the IOSCO Objectives and Principles of Securities Regulation where the IMF noted that while Ireland had industry guidance on how to deal with fund pricing errors, there were no regulatory rules in this area. The proposals set out in CP130 go further than the IMF’s observation and address the treatment, correction and redress of four categories of fund errors, namely, pricing errors, investment breaches, fee errors and control breach errors.
Under the proposals, Irish authorised fund management companies will be responsible for ensuring that in the event of a fund error, the fund and impacted investors are "appropriately rectified" (which may mean financial redress in some cases). A fund management company will need to conduct both a quantitative and qualitative assessment of the error to determine the steps to be taken. A materiality threshold will apply in most cases and in most cases only "advertent" breaches will result in financial redress. The proposed regime will comprise of rules and guidance. The consultation process, which is the first stage in a two stage process, closes on December 9, 2019 and the Central Bank has indicated that a further consultation process may follow based on the feedback that it receives from the industry.
After introducing mandatory reporting on Irish fund redemptions by administrators in January of this year and as part of its Brexit-readiness strategy, the Central Bank of Ireland issued a Dear CEO Letter to all UCITS management companies and AIFMs in August. In the letter, the Central Bank reminds boards of the importance of liquidity management, that fund management company boards are responsible for liquidity management, including compliance with all applicable regulations and guidance and that the execution of the liquidity management framework of each fund must be appropriately calibrated to take into account dealing frequency, investment strategy, portfolio composition and investor profile on an ongoing basis. The letter reminds boards of the importance of liquidity stress testing and highlighted the Central Bank’s expectation that directors and designated persons of management companies assess the liquidity position of each fund under management on an ongoing basis.
The Central Bank of Ireland launched ASP Sanctions Guidance in November, giving further detail on the factors which it takes into account when imposing sanctions in enforcement cases under its Administrative Sanctions Procedure (ASP).
In September, the Central Bank of Ireland published Anti-Money Laundering and Countering the Financing of Terrorism (AML / CFT) Guidelines for the Financial Sector (the Guidelines). The Guidelines set out the expectations of the Central Bank in respect of credit and financial institutions compliance with their AML/CFT obligations as set out in the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010, following the transposition of the EU’s Fourth Anti-Money Laundering Directive (4AMLD) into Irish law. The Guidelines also incorporate expectations set out in previous Central Bank AML/CFT Sectoral Reports, AML/CFT Bulletins, and relevant European Supervisory Authority Guidelines.
In August, a statutory instrument amending the existing UCITS regulations (which transpose the UCITS Directive into Irish law) and another statutory instrument amending the existing AIFMD regulations (which transpose the AIFM Directive into Irish law) were published. As well as updating the regulations to make reference to recent European legislation such as MiFID II and to address inconsistencies with the corresponding European directives, both sets of regulations were revised to provide that in the event of the insolvency of the depositary or any EU-based sub-custodian, assets held in custody or cash assets cannot be available for distribution to the creditors of the depositary or any EU-based sub-custodian as applicable. By extending this requirement to cash assets, the Irish domestic legislation goes further than the corresponding EU directives.
The Investment Limited Partnership Act, 1994, which governs the establishment and operation of regulated investment limited partnerships in Ireland is currently being updated and continues to make its way through the Irish parliament. The revised legislation is expected to be enacted shortly. The Central Bank of Ireland is in the process of updating its investment fund rulebook to accommodate these updates.
Donnacha O’Connor
Dillon Eustace
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