2018 is here, bringing with it a number of regulatory deadlines for financial service providers, including investment funds and their service providers. This briefing sets out a number of those regulatory deadlines, listed in alphabetical order.
Alternative Investment Fund Managers (“AIFMs”) must submit their annual audited accounts to the Central Bank of Ireland (“Central Bank”) within four months of the relevant reporting period. The annual audited accounts must be accompanied by the Minimum Capital Requirement Report, which forms part of the AIF Rulebook.
AIFMs must report certain financial information to the Central Bank on a half-yearly, quarterly or monthly basis. This includes interim financial statements such as a Balance Sheet and Profit & Loss account and the Minimum Capital Requirement Report which forms part of the AIF Rulebook.
Each AIFM must also ensure that it obtains any appropriate annual confirmations that it may require from any relevant party to ensure compliance with the terms of the AIFM’s programme of activity. It must also ensure the adoption of the valuation policy and make disclosure in respect of connected party transactions.
The Benchmark Regulation
From 1 January 2018, a supervised user of a benchmark, including UCITS, UCITS Managers and AIFMs, must have in place a written plan setting out the actions that it will take in the event that a benchmark materially changes or ceases to be provided. It must also ensure that the plan is reflected in its contractual relationships with clients.
Where the object of a prospectus published under the UCITS Directive 2009/65 is transferable securities or other investment products that reference a benchmark, the offeror must ensure that the prospectus also includes clear and prominent information stating whether the benchmark is provided by a benchmark administrator that is included on the register of administrators and benchmarks. A UCITS prospectus approved prior to 1 January 2018 must be updated to include this information on the first occasion it is being updated after 1 January 2018 or at the latest by 1 January 2019.
Existing fund management companies (being UCITS management companies, AIFMs, self-managed UCITS and internally managed AIFs) must comply with a number of new rules 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. They are set out in the Central Bank’s CP86 Fund Management Companies Guidance 2016.
Common Reporting Standard
The Common Reporting Standard (“CRS”), also known as the Standard for Automatic Exchange of Financial Account Information, requires participating jurisdictions to exchange certain information held by financial institutions regarding their non-resident customers. Under the Returns of Certain Financial Information by Reporting Financial Institutions Regulations 2015, financial institutions must report CRS information to Revenue by 30 June each year, with the next returns due by 30 June 2018.
Under the Irish Funds Corporate Governance Code for Collective Investment Schemes and Management Companies ("Code"), the Board must carry out an informal review of its overall performance and that of individual directors at least annually. It must also review compliance with its procedures for dealing with conflicts of interest and the terms of reference of any board committees at least on an annual basis.
The Code also requires a Board to carry out a three year formal documented review and any Board that has not yet done so should complete this review as soon as possible, presuming this three year period has expired.
Directors’ Compliance Statements
Under the Companies Act 2014, all public companies (“PLCs”), including UCITS PLCs must make an annual compliance statement in the directors’ report, which forms part of the company’s annual financial statements. In their compliance statement, the directors must acknowledge their responsibility for securing the company’s compliance with specified provisions of the Companies Act, Irish tax legislation and additional market abuse requirements in respect of listed companies. They must also confirm certain other matters. This requirement does not apply to non-UCITS investment fund PLCs authorised under the Companies Act. For further information, see our briefing here.
Regulation (EU) 648/2012 on over the counter (OTC) derivatives, central counterparties and trade repositories imposes a number of obligations on EU derivatives market participants, including funds and fund managers. These include a) an obligation to clear certain derivatives via a central counterparty (“CCP”), and b) an obligation to impose margin requirements on all OTC derivative contracts that are not cleared by a CCP and which are entered into at a time when both parties are past the EMIR phase-in date applicable to them. The clearing obligation commenced on 21 January 2016 and is being gradually phased in over the course of the next few years. Fund and fund managers can find further information regarding these phase in dates in our recent briefing here.
Commission Delegated Regulation 2016/2251 sets out regulatory technical standards for margin requirements for uncleared OTC derivatives (“RTS”). Generally, all derivatives users are required to exchange variation margin since 1 March 2017, however no variation margin need be exchanged for physically settled foreign exchange forwards (“FFX”) until 3 January 2018. On 18 December 2017, the European Supervisory Authorities issued draft amendments to the RTS which will, if adopted, provide for a derogation from the requirement to exchange variation margin, permitting in-scope counterparties to provide in their risk management procedures that variation margins are not required to be posted or collected for FFX contracts where one counterparty is not, or if it were established in the EU would not be, an institution (effectively, credit institutions and certain investment firms). On 19 December, in a related development, the Central Bank published a statement on the variation margin requirements (here), confirming that it intends to “apply its risk-based supervisory powers in the day-to-day enforcement of applicable legislation in a risk-based and proportionate manner until the amended RTS enter into force.” See our briefing here.
The requirement to exchange initial margin commenced on 1 September 2017. Counterparties that have, or belong to groups each of which has, an aggregate average notional amount of non-centrally cleared derivatives that is above EUR 1,500 billion must exchange initial margin from 1 September 2018. For further information see our briefing here.
Fitness & Probity Standards
Each regulated financial services provider (“FSP”) must complete an Annual Pre-Approval Controlled Function (“PCF”) Confirmation Return to the Central Bank via the Online Reporting System. In the Return, the FSP must list all of its active PCF holders and (i) confirm that each such holder is compliant with the Fitness and Probity Standards and (ii) that they continue to agree to abide by those standards.
The Annual PCF Confirmation Return due date has not yet been published on the Central Bank website (the 2016 return had a filing deadline of 28 February 201).
General Data Protection Regulation
Funds and fund managers must put in place the necessary measures to comply with the General Data Protection Regulation 2016/679(“GDPR”) by 25 May 2018. This is likely to involve reviewing internal policies and procedures, subscription agreements, prospectus disclosures and website terms and conditions, as well as service provider and data transfer agreements.
Key Investor Information Documents (KIIDs)
Commission Regulation 583/2010 requires UCITS to make an updated KIID available to investors within 35 business days of 31 December each year. This year the annual update of the KIID must be filed no later than 19 February 2018. Any update to the KIID filed with the Central Bank must be translated (as necessary) and filed in any other host jurisdictions where the UCITS is registered to market its shares and uploaded on the UCITS' website
The revised Markets in Financial Instruments Directive 2014/65 (“MiFID II”) and the Markets in Financial Instruments Regulation 600/2014 (“MiFIR”) apply from 3 January 2018. While UCITS and AIF management companies are not directly in-scope of most of the requirements, they may be indirectly impacted where they receive services from or provide services to in-scope investment firms.
Money Laundering/Terrorist Financing
Funds and fund service providers will already be aware of their requirements under the Criminal Justice (Money Laundering and Terrorist Financing) Acts 2010 and 2013, including the need to review AML policies and procedures and ensure that the Board of Directors and other staff receives appropriate training.
The Fourth Money Laundering Directive 2015/849 should have been transposed into Irish law by June 2017, however the transposing legislation has not yet been published. Funds and fund service providers will need to ensure that they comply with the transposing legislation once it enters into force. For further information see our briefing here.
Money Market Fund Regulation
The Money Market Fund Regulation (“MMFR”) introduces new requirements for Money Market Funds ("MMFs") in particular, portfolio composition, valuation of assets, diversification, liquidity management and credit quality of investment instruments and will apply from 21 July 2018. Existing UCITS and AIF MMFs have until 21 January 2019 to demonstrate compliance with MMFR.
Packaged Retail Investment and Insurance Products (PRIIPs)
The PRIIPs Regulation applies to the distribution of any fund to a retail investor in the EU, since 1 January 2018. Broadly, the PRIIPs Regulation requires a manufacturer or distributor of a fund to draw up and make available a pre-contract disclosure document (a “key information document” or “KID”) before making the fund available to a retail investor in the EU. Managers of UCITS are exempt from the obligation to produce a PRIIPS KID in respect of the UCITS it manages until 31 December 2019.
Investment funds must comply with a number of tax reporting requirements under the Return of Values (Investment Undertakings) Regulations 2013 and should contact their administrators to ensure that their funds are fully compliant with these Regulations for the year ending 31 December 2017.
A UCITS Management Company must submit its annual audited accounts to the Central Bank within four months of the relevant report period end as well as its minimum capital requirement report. It must also submit half yearly accounts. Like AIFMs, UCITS’ Management Companies must ensure that they get all annual confirmations relevant for compliance with their business plans.