On 19 September 2014 the Central Bank of Ireland (the “Central Bank”) published Consultation Paper 86, a ‘Consultation on Fund Management Company Effectiveness – Delegate Oversight’ (“CP 86”) (available here).

Scope of Activities

CP 86 has been published following a review by the Central Bank of Irish fund management  companies.  Its  publication also follows an engagement with a group  of industry professionals on good practice for directors of Irish fund management companies (the report published by that industry group is contained at Appendix 1 to CP 86). This work has culminated in the following  primary  proposed  measures  to improve  the  oversight  functions  pertaining to  Irish  fund  management  companies1:

Delegate oversight guidance

CP 86 proposes issuing guidance for boards of Irish fund management companies on the oversight of delegates, such as investment managers, fund administrators, depositaries and distributors.

Streamlining designated managerial functions

CP 86 contains proposed enhancements to the existing governance structure, including rationalising the current list of designated functions undertaken by specific designated persons to six designated tasks (from 15 functions in respect of AIFMs and nine in respect of UCITS management companies). This proposal has been formulated to avoid the potential for overlap between the various functions which the Central Bank believes might create a risk that accountability in relation to a matter could be in doubt. The six revised proposed designated tasks (the “Designated Tasks”), which are intended to apply to all Irish fund management companies, are as follows:

  • risk management;
  • investment  management;
  • regulatory compliance;
  • distribution;
  • capital and financial management; and
  • organisational effectiveness.

Requirement for Irish resident directors

To ensure the availability of the necessary skillsets required to oversee the Designated Tasks, CP 86 is proposing to relax the Central Bank’s existing requirement to have two Irish resident directors on the board of an Irish fund management company. The proposed changes have a two-pronged approach. First, the Central Bank proposes to define what qualifies a director as ‘Irish Resident’ as being a person who spends at least 110 working days in Ireland per annum. Secondly, it will be possible to replace one Irish resident director with  an individual based outside of Ireland provided that person (a) has the necessary competencies to perform one of the six Designated Tasks, (b) commits to making himself/herself available to the Central Bank at short notice, if required, and (c) is unconnected to a service provider.

Rationale for board composition

CP 86 proposes that the board of an Irish fund management company must document, as part of its approval and authorisation process, specifically how the composition of its board as a whole provides it with sufficient expertise to conduct the tasks expected of the directors, whether acting as members of the board or, where relevant, as the designated person for a Designated Task. This measure is intended to ensure that a board has the appropriate balance of skills and competencies. It is also proposed that on an on-going basis, the person who has responsibility for the Designated Task of monitoring organisational effectiveness will be expected to keep under review the effectiveness of the board and the Irish fund management company, having regard to the contribution of each of the individual directors and individual designated persons.