The purpose of this briefing note is to provide information on the review by the Central Bank of the business plans for UCITS self-managed investment companies ("SMICs"). The Central Bank reviewed the business plans of all UCITS management companies for UCITS IV compliance on or before 1 July 2011. However, for all UCITS SMICs authorised prior to 1 July 2011, the Central Bank proceeded on the basis that each of these self-certified that they met the UCITS IV requirements before 1 July 2011 and it was known that the Central Bank would begin to carry out reviews of these business plans in 2012.
In February 2012 the Central Bank proposed a timetable for the review of the UCITS SMIC business plans based on the date of their authorisation. Before this review process got underway the Legal and Regulatory Committee of the IFIA requested that the Central Bank reconsider its approach to the application of all of the organisational rules that apply to UCITS management companies to SMICs. The Level 2 measures1 highlighted the need to have the same rules of conduct and provisions regarding conflicts of interest and risk management for both types of entities. However, some organisational rules were applied by the Level 1 measures2 to both SMICs and UCITS management companies and yet the other organisational rules in the Level 2 measures applied only to UCITS management companies. The Central Bank took the position that all UCITS SMICs must be fully UCITS IV compliant - in other words that they adopt all the same rules as those that apply to UCITS management companies. However, as a consequence of the IFIA submission the Central Bank has confirmed that because proposed amendments to the UCITS regime contemplated by the UCITS IV Directive do not include common organisational rules for the two entities, the Central Bank is willing to reconsider the applicability of all of the organisational rules to SMICs.
Although the Central Bank's starting point is that both UCITS management companies and SMICs should be subject to the same regime, it acknowledges that a UCITS management company may engage in more complex activities (for example, in individual portfolio management and passporting into other EU jurisdictions) and so not all of the organisational rules that it adheres to should apply to SMICs.
In short, the Central Bank has requested that the IFIA make a submission which addresses why each particular organisational rule should not apply to SMICs. This submission is to be made to the Central Bank by 21 May 2012.
We would expect the Central Bank to respond promptly to that submission given that is has already indicated that it would like the majority of the reviews of the business plans to be completed by early 2013. In the meantime, the original proposed dates for the submission of the business plans for review no longer apply. Once a final position of the applicability of the organisational rules is determined, the Central Bank will issue revised deadlines for the submission of the draft SMIC business plans for review.
We will be in touch with clients shortly to provide an update on this review and the revised timing for the submission of business plans.
Footnotes
1 Directive 2010/43/EC
2 Directive 2009/65/EC
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.
