Originally published 11 October, 2010

Central Bank of Ireland replaces the Financial Regulator

Certain provisions of the Central Bank Reform Act 2010, reforming the Irish financial services regulatory structure, came into effect on 1 October, 2010 following the signing of a commencement order on 28 September, 2010. As a result, the office of the Financial Regulator has been dissolved and the Central Bank of Ireland is now the single regulatory body responsible for the authorisation and supervision of Irish regulated investment funds.

QIF minimum subscription and investor criteria changes expected shortly

The minimum investment amount and investor eligibility criteria for Irish qualifying investor funds (QIFs) are set to change shortly. The minimum subscription will be €100,000 – reduced from €250,000 - and investors will need to be either MiFID professional investors or certify that they have the knowledge and experience necessary to understand the investment. Certification can also be made by a connected party of the fund, subject to certain conditions. These changes, which are expected to be confirmed shortly, will open up QIFs to a much broader investor base.

Existing QIFs will need to revise their prospectus and subscription agreement in order to avail of the new criteria.

Fund director corporate governance code – update

As advised in our e-briefing of 18 June, 2010 a new corporate governance code for investment fund directors is to be formulated. Discussions between the Irish Funds Industry Association and the Central Bank of Ireland have been ongoing of late with the code expected to be agreed shortly. However, in the interim, the Central Bank of Ireland has taken the additional step of indicating a limit on the number of directorships that it considers appropriate – identifying a figure of 30. Further, it has indicated that it expects certain boards to require restructuring to take account of the code once implemented. In effect, the Central Bank of Ireland expects persons with a number of directorships above the determined limit to resign from positions in order to fall into line with the code. This will also necessitate the appointment of replacement directors in some cases.

UCITS IV - management company requirements for self-managed investment companies

The UCITS IV Management Company Directive (2010/43/EU) sets out requirements regarding matters including:

  • organisational and administrative requirements (such as compliance, internal audit, complaints handling);
  • conflicts of interest; and
  • conduct of business rules (including due diligence and monitoring of delegates; best execution policy and order handling policy).

For self-managed investment companies that do not employ a UCITS management company, a number of the provisions will apply directly. In some cases though, 2070079.1 corresponding, proportionate requirements will apply, as to be prescribed by national regulators.

In an Irish context, implementing legislation and regulatory guidance will be produced shortly (by early 2011) at which point the specific requirements will become more clear. However, it is certain that Irish self-managed UCITS will need to review and revise their organisational procedures (as outlined in their business plan) in order to ensure that necessary requirements are met.

UCITS IV - KII - timing implications in Germany

We understand the 12 month grace period for producing a KII post-July 2011 may be an issue for UCITS registered in Germany. This is because Germany is set to introduce an Investor Protection Enhancement Act in early 2011 requiring that regulated intermediaries provide their customers w i t h a "product information document" on each financial instrument they offer to them. The KII will meet this requirement. However, it is not clear what will need to be produced by German registered UCITS that have not yet produced a KII, if this piece of legislation comes into effect before July 2012.

This briefing is correct as at 11 October, 2010.

Disclaimer

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