In his keynote speech at today's Irish Funds (IF) Annual Global Funds Conference in Dublin, Irish Minister of State with responsibility for International Financial Services Simon Harris re-iterated the Irish Government's support and commitment to the Irish funds industry, and he highlighted its recently published strategy paper for the Irish international financial services sector, IFS2020.

Reflecting on Ireland’s position as the fastest-growing economy in the EU last year, and the European Commission’s forecast for the same again this year, Minister Harris noted that the decision to establish or service an investment fund in Ireland is based on a unique combination of the Irish legal and regulatory system, the specialist skills and expertise of its workforce, a pro-business approach, infrastructure, tax environment and government support.

Commenting on the importance of Ireland's competitive offering, Minister Harris emphasised that IFS2020 recognises the importance of building on Ireland's existing strengths in talent, technology, innovation and excellent client service, while focusing on capturing new opportunities in a changing market and embracing the highest forms of governance.

Central Bank Update

Mr Gareth Murphy, Director of Markets Supervision at the Central Bank of Ireland, also spoke at today's conference on a number of matters including corporate governance, the NAV calculation process, the AIFMD third country passport, Capital Markets Union and market finance.  With respect to aspects of fund corporate governance, the Central Bank has decided not to impose a hard limit on the number of Irish resident board directorships which an Irish resident director may hold.

Instead, the Central Bank will apply a two-staged assessment: where an individual director has an aggregate professional time commitment in excess of 2,000 hours per year, the Central Bank will then consider whether there are 20 or more directorships being held.  Pursuant to the Central Bank’s risk-based approach, where this two pronged assessment indicates that fund governance standards on the relevant boards may be undermined, this will attract additional Central Bank supervisory attention.

Mr Murphy noted that the Irish funds industry has a substantial population of over 2,000 active directors with a broad range of expertise and that, amongst this population, there is a strong level of commitment to pursue high ethical standards and directorial responsibility.

The Central Bank intends to issue further guidance on directorships in the coming days, and Matheson will keep you updated.  In addition, Mr Murphy confirmed that the Central Bank will provide feedback on the consultation on fund management company and self-managed investment company effectiveness (“CP86”) which issued in September 2014 regarding control over the activities of delegates and corporate governance.  In advance of this, Mr Murphy confirmed today that the following points will be published in the CP86 feedback statement:

  • the Central Bank will clarify the meaning of the designated person role - a fund governance concept which has been in existence since 2003 but which has evolved as a result of regulatory change and industry practice; in particular, the Central Bank will make it clear that designated persons are responsible for managerial functions in the fund management company; and
  • the Central Bank will confirm that these managerial functions have been streamlined to six key areas covering (i) investment portfolio management, (ii) investment risk management, (iii) distribution, (iv) operational risk, (v) capital and financial management and (vi) compliance.  After careful consideration, the Central Bank has decided that the “organisational effectiveness” role which was consulted on will not be a managerial function, but rather is a task that must be performed by one of the independent directors.