With respect to activity on the legal and regulatory agenda for asset management and investment funds, the Asset Management Team at Matheson would like to brief you on a number of recent and upcoming Irish and European developments.
Central Bank Publishes Investor Money Regulations
Following industry negotiations, the Irish Investor Money Regulations have now been published by the Central Bank of Ireland (the “Central Bank”). These regulations seek to protect client assets and are applicable to fund service providers including administrators, custodians, transfer and registration agents. The rules have been introduced on a statutory footing, and will come into effect on 1 April 2016. At a Central Bank industry forum held on 20 May 2015 at which Matheson attended, the Central Bank’s Client Asset Specialist Team (CAST) noted that it will work with the dedicated Irish Funds Industry Association (“IFIA”) client asset working group to deal with practical issues which arise as firms consider implementation. It was also indicated that a Q&A on the regulations is being developed and will be issued in due course. Firms are required to have an Investor Money Management Plan (IMMP) finalised and signed off within three months of 1 April 2016, and CAST has indicated that it is happy to work with firms on their structures and processes. The IMMP will be a critical document in the context of the governance and risk management in relation to the fund service provider’s investor money obligations, and the Central Bank has confirmed that it will not be issuing a pro-forma IMMP template, as this document must be tailored to the relevant firm’s business model and complexity. The Central Bank intends to make use of thematic reviews post July 2016 to assess the standard of IMMPs and emerging practices in this regard. It has confirmed, however, that industry feedback will be considered in order to communicate good and bad practices and to assist with development of the quality of IMMPs. Read more.
Companies Act 2014 to Apply from 1 June 2015
The commencement order for the Companies Act 2014 (the “Act”) was published on 1 May 2015 and, as expected, it has been confirmed that the vast majority of the provisions of the Act will be commenced on 1 June 2015. The limited number of provisions that do not commence on that date include obligations relating to financial statements, which will only apply in respect of a financial year commencing on or after 1 June 2015. The Act essentially consolidates Irish companies’ legislation but also introduces a number of important innovations and changes. Management companies and alternative investment fund managers incorporated in Ireland will be impacted by the Act to a greater extent than investment companies.
Please see our dedicated Companies Act 2014 website page for more information on the changes introduced by the Act and the implications for investment companies and fund managers.
European Commissioner Comments on EU Financial Services Law and the Capital Markets Union
Speaking at a conference in London on the Capital Markets Union, the European Commissioner for Financial Stability, Financial Services and Capital Markets Union, Lord Jonathan Hill has explained that, this year, the Commission intends to bring forward just one fifth of the number of new legislative initiatives as was the case in a typical year in previous Commissions. Commissioner Hill has stated that there will be less new legislation in the future and more focus on bedding-in the reforms of recent years, together with an even greater focus than before on proportionality.
He noted that, over the last five years, the Commission had to legislate at speed in the context of the financial crisis. His view is that a new phase is now being entered, where it is necessary to think more acutely about the impact of regulation being passed on jobs and growth; to take a look at the combined effect of the legislation, to see whether there have been unintended consequences; and if the evidence does show that the rules are not proportionate to the risks posed by different types of institution, or if it shows that in certain areas the combined effect of different pieces of legislation is working against the Commission's priority of jobs and growth, to have the confidence to adapt the existing framework.
A key initiative in the work programme of Lord Hill’s Commission is the build a Capital Markets Union (“CMU”). The CMU is an ambitious project to create a single market for capital across all EU member states by 2019. It is intended to improve access to financing for businesses across Europe and investment projects such as infrastructure, and to provide for greater diversification in the funding of the European economy. Read more.
ELTIFs: Regulation Published in the Official Journal of the European Union
On 19 May 2015, the regulation on European Long Term Investment Funds ("ELTIF Regulation"), which introduces ELTIFs to the market, was published in the Official Journal of the EU. The ELTIF Regulation comes into force 20 days after that publication, and applies throughout member states of the EU from 9 December 2015. ELTIFs are seen as a beneficial new regulated European fund “brand” investing in companies and projects that need long-term capital. ELTIFs are available for investment by retail and non-retail investors, and are permitted to operate a cross-border EU sales passport. Read more.
Money Market Funds: European Parliament Approves Revised Text
The European Parliament voted to approve an amended text prepared by the Committee on Economic and Monetary Affairs ("ECON") on the proposed regulation on money market funds by a vote of 487 votes to 155 (with 51 abstentions) at its plenary sitting on 29 April 2015. The approved version of the legislation differs significantly from that originally published by the Commission. Read more.
Retail AIFs and UCITS: New KID on the Block
With an application date of 31 December 2016, the regulation on packaged retail and insurance based investment products introduces a new standard-form product information guide called the key information document for retail non-UCITS. A transitional period under the PRIIPs Regulation applies in relation to UCITS, which are already required to provide a key investor information document similar to the KID. Specifically, those managing or selling UCITS are exempt from the requirement to produce a KID pursuant to the PRIIPs Regulation until 31 December 2019, at which time the key investor information document will be replaced by the KID. Read more.
UCITS Mergers: ESMA Provides Clarification on Approach to Past Performance
In an update to its Q&A document on the UCITS Key Investor Information Document, the European Securities and Markets Authority ("ESMA") has now clarified the treatment of past performance information in the case of UCITS mergers - where the receiving UCITS is a newly established UCITS with no performance history and is in effect a continuation of the merging UCITS. Read more.
Benchmark Regulation: Proceeds to Trialogue Stage
On 19 May 2015, the European Parliament voted to approve the proposed EU legislation to regulate indices used as benchmarks in financial instruments and financial contracts (the "Benchmark Regulation"). This vote means that trialogue negotiations between the European Parliament, the Council of the EU and the Commission can now proceed, with a view to reaching agreement on the final text possibly before the end of this year. Read more.
Preparing for UCITS V There is now less than a year to prepare for the implementation of the UCITS V directive, as EU member states must adopt and publish the laws and regulations necessary to comply with UCITS V by 18 March 2016. With respect to next steps, we estimate that a number of implementing measures will be adopted by the Commission before the transposition deadline. UCITS V introduces new rules in relation to depositaries, the remuneration policies of UCITS managers and a harmonised minimum sanctions regime across member states. For further information on UCITS V and its key provisions, please see our suite of UCITS briefing notes.
Listings: New Irish Stock Exchange NAV Submission Process Due September 2015
In September 2015, the Irish Stock Exchange ("ISE") will introduce a new process for submitting Net Asset Values ("NAV") in relation to listed funds. The new process will operate through the ISE’s online portal and will provide a single centralised location for users to access ISE services. Read more.