UCITS IV legislation is signed into law

The European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 ("UCITS Regulations") were signed into law on 1 July 2011. This statutory instrument consolidates all previous UCITS legislation and transposes the requirements of Directive 2009/65/EC, the "UCITS IV Directive".

Central Bank of Ireland issues revised UCITS Notices, NU Series of Notices and Guidance Notes

On 1 July 2011, the Central Bank of Ireland issued revised UCITS Notices, NU Series of Notices and Guidance Notes.

We set out below some of the key new developments.

Outsourcing rules introduced

The Central Bank has issued outsourcing rules to replace the minimum activities regime as Annex II to both the UCITS Notices & NU Series of Notices. The minimum activities regime applied to Irish funds (both UCITS and non-UCITS) from 1995 and required key fund administration functions to be carried out by the fund's administrator in Ireland. However, the introduction of EU cross-jurisdictional servicing capability (through the management company passport under UCITS IV) has led the Central Bank to reconsider this position.

The outsourcing rules will have a significant impact on the Irish fund administration industry, particularly given that they apply to the administration of non-Irish funds as well as Irish funds.

New Guidance Note 2/11 ("GN 2/11")

GN 2/11 entitled "Professional collective investment schemes: Appointment of prime brokers ("PBs") and related issues" has been introduced for professional investor funds ("PIF") and qualifying investor funds ("QIF") and replaces prior draft guidance. GN 2/11 now specifies that the minimum credit rating for a PB is A-1 or equivalent (previously this was A1/P1). The new guidance also specifies that the PB may return cash in lieu of assets in certain circumstances such as the default of the fund or the PB's inability to return assets provided that the PB agrees to indemnify the fund against any costs, losses etc. incurred as a result of such an election (other than in the exercise by the PB of the right of set-off upon default by the fund). For a PIF any cash delivered to the PB which is not protected by client money rules or other similar arrangements to protect the fund against the insolvency of the PB may now be rehypothecated up to 140% of the level of the fund's indebtedness to the PB. Finally GN 2/11 makes it clear that the trustee must undertake certain defined steps designed to ensure compliance with the new requirements.

UCITS authorised in another Member State intending to market its units in Ireland

In addition to the requirements applicable to UCITS authorised in another Member State intending to market units in Ireland as set out in UCITS 15, the Central Bank has issued a guidance paper for such UCITS which attached a new notification letter which must be submitted to the Central Bank.

Change in Central Bank of Ireland policy regarding eligible assets and investment restrictions

The Central Bank has confirmed it will now accept, subject to certain conditions, that Irish authorised collective investment schemes may invest up to 100% of their assets in securities issued or guaranteed by the Government of Brazil or the Government of India (provided the issues are of investment grade).

Alternative Investment Fund Managers Directive published

Directive 2011/61/EU, the Alternative Investment Fund Managers Directive (the "AIFM Directive"), was published in the Official Journal of the European Union on 1 July 2011. The AIFM Directive will enter into force 20 days following publication and Member States will then have 2 years to transpose the Directive into national law.

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