Investment Funds Update: Key Highlights of 2018 and Agenda for 2019
11 December 2018
Corporate governance for investment firms
In 2018 the Central Bank published Corporate Governance Requirements for Investment Firms and Market Operators. The requirements apply to firms authorised by the Central Bank that are designated as High, Medium High or Medium Low Impact under PRISM with effect from 1 July 2019. The requirements do not apply to firms designated as Low Impact but these firms are encouraged to adopt the requirements. The new requirements relate to the composition of boards, the chairman appointed, and the committees of the board.
Any breach of the requirements may result in the Central Bank using its supervisory or enforcement powers.
Investment firms need to analyse their corporate governance structures to ensure compliance with the new requirements.
We discuss the requirements in more detail here
A review of UCITS performance fees by the Central Bank was expected for some time and in September of this year, the Central Bank issued a letter, outlining the results of its review of performance fees payable by Irish UCITS.
The purpose of the review was to determine if the calculation and payment of such performance fees resulted in investors interests being protected at all times. The results confirmed that the majority of the UCITS funds reviewed employed good practices. However, the Central Bank highlighted its concern that the guidance issues on the use of performance fees by UCITS was not being applied in a consistent and comprehensive manner.
Fund management companies, including self-managed UCITS, must maintain effective oversight over their delegates. This obligation includes ensuring the calculation and verification of performance fees is in line with the guidance.
Fund management companies/self-managed UCITS were required to carry out a review of methodologies used when calculating performance fees by 30 November 2018, to ensure full compliance with the guidance.
Read more here
Changes to fund filing procedures
The Central Bank introduced a new streamlined filing procedure for particular UCITS and retail AIF (alternative investment fund) authorisation and post authorisation filings.
Prior reviews will no longer be carried out by the Central Bank for the following fund documentation/applications:
Establishment of new share classes
Trust Deeds/Deeds of Constitution
Investment Limited Partnership Agreements
- UCITS Financial Indices
This is a welcome change and will ensure filings are processed in a timely manner.
The changes became effective on 9 October 2018. The Central Bank has confirmed that it will carry out quality assurance checks on a random basis.
Read more here
The Central Bank has indicated that it will continue its efforts to ensure compliance by regulated entities with their obligations in 2019. For funds in particular, this will include ensuring compliance with the provisions of CP86, the rules applying to fund management companies. Further work on the use of outsourcing by regulated firms is also on the horizon for 2019. Unsurprisingly, Brexit, and its implications, is also high on the Central Bank’s agenda and it will continue to be a hot topic in early 2019 as negotiations continue.
For more information on what can be expected in 2019, please contact a member of our Investment Funds team.
The content of this article is provided for information purposes only and does not constitute legal or other advice