The Central Bank of Ireland (Central Bank) issued its guidance for fund management companies on managerial functions, operational issues and procedural matters which includes new rules for fund management companies on an effective supervision requirement and on the retrievability of records. These rules are summarised in the Feedback Statement to CP86 – third consultation. This concludes the work of CP86 which has been ongoing since 2014 and comprised three separate consultations which focused, in particular, on Governance, Compliance and Effective supervision.

Next steps and transitional arrangements are as follows

Central Bank management company guidance

  • The Central Bank published the first three chapters of its Fund Management Company Guidance in November 2015 on (i) delegate oversight; (ii) organisational effectiveness; and (iii) directors’ time commitments. The Central Bank has now issued both the initial three chapters and the final three chapters of its Fund Management Company Guidance which now also covers (i) managerial functions; (ii) operational issues; and (iii) procedural matters
  • Divergence from the guidance will not be a regulatory breach. However, the Central Bank’s supervisors will have reference to this guidance when forming a view as to whether a fund management company has complied with its regulatory obligations.

Transitional arrangements

  • Fund management companies must comply with the new rules introduced by CP86 by 1 July 2018. These new rules relate to the streamlining of managerial functions to 6 managerial functions, the Organisational Effectiveness role, the retrievability of records rule and the effective supervision requirement.
  • The Central Bank will only approve applications for authorisation from any new fund management company submitted on or after 1 July 2017 where the fund management company will be organised in a way which complies with the new rules introduced by CP86.
  • The new rules will be included in the amended Central Bank UCITS Regulations and in the forthcoming Central Bank AIF Regulations.

Rule on effective supervision requirement

Of particular interest to the funds industry is the Rule on Effective Supervision requirement. The final requirement is summarised below:

A management company shall conduct a preponderance of its management in the EEA.

Where a management company has a PRISM impact rating of-

a) Medium Low or above, the management company shall have at least -

i. 3 directors resident in the State or, at least, 2 directors resident in the State and one designated person resident in State,

ii. half of its directors resident in the EEA, and

iii. half of its managerial functions performed by at least 2 designated persons resident in the EEA, or

b) Low, the management company shall have at least

i. 2 directors resident in the State,

ii. half of its directors resident in the EEA, and

iii. half of its managerial functions performed by at least 2 designated persons resident in the EEA.

The A&L Goodbody Asset Management & Investment Funds team will issue a detailed note on the new requirements shortly.

We will issue a detailed note on the new requirements shortly.

A Feedback Statement together with the submissions received have been published on the Central Bank’s website here.

Gerry Cross, Director of Policy and Risk, said: “Today’s publication on the outcome of our consultation on fund management company effectiveness is an important milestone and marks the conclusion of 3 years’ policy work on the matter. It means that we have now published a substantial body of guidance for fund management companies which sets out clearly our expectations of directors and management. This is supplemented by a small number of new rules which together delivers a package of measures that addresses the governance, compliance and effective supervision of fund management companies.”