On 4 November 2015, the Central Bank published feedback on its consultation on delegate oversight for fund management companies along with its finalised guidance on the subject. The publication of this guidance is the latest chapter in the initiatives proposed by the Central Bank in its September 2014 consultation to enhance fund management companies’ control over their delegates (CP86).
The oversight of delegates guidance (ODG) is located in Part 1 of a new document entitled “Fund Management Company Guidance” (which document also incorporates the Central Bank’s guidance on (a) the independent organisational effectiveness role (Part II) and (b) directors’ time commitments (Part III), which were published by the Central Bank at the time of its feedback on CP86 in June 2015). The Central Bank intends that future fund management company guidance will also ultimately be located in this single document (the Guidance).
There are no material differences between the finalised ODG and the draft published in June 2015. The ODG affects UCITS management companies and AIFMs, self-managed UCITS and AIFs and, to a lesser extent, investment companies externally managed by UCITS management companies or AIFMs.
There are no “surprises” in the ODG and essentially the Guidance complements the duties of boards/directors under the Companies Act, UCITS and AIFMD transposing legislation, CBI UCITS Regulations, AIF Rulebook and guidance and the IF Corporate Governance Code. It should be noted in particular that compliance with the Guidance must be minuted and that a fund management company should provide separate reports to its investment company which it manages regarding the performance of delegates. The fund management company must not simply include the reports of the delegates themselves but is required to provide commentary on the delegate’s reports.
Divergence from the Guidance will not be a regulatory breach. However, the Central Bank supervisors will have reference to the Guidance when forming a view as to whether a fund management company has complied with its regulatory obligation. It is not entirely clear as to when the ODG takes effect and we have raised this matter with the Central Bank. In its feedback statement on CP86 the Central Bank indicated that when it had finalised the series of publications on fund management company guidance then fund management companies will be equipped with guidance on how the Central Bank expects fund management companies to comply and demonstrate compliance with regulatory obligations. We understand that the Central Bank will not in fact be finalising all outstanding guidance within the originally proposed 2015 calendar year timeframe.