Updates of interest include:
Speaking at two industry events*, Grainne McEvoy, Director of Securities and Markets Supervision set out the Central Bank’s 2017 supervisory priorities, together with other planned initiatives, as they relate to Asset Management.
- Fund Fees: work on fund fees will continue, building on that conducted in 2016 with regard to Total Expense Ratios. The EU Commission has also identified fund fees as a priority and the European Supervisory Authorities (ESAs) will be asked to consider the transparency of long-term retail investment and pension products, and to perform an analysis of their actual net performance and fees. Although full details have not been announced, it is expected that ESMA and the other ESAs will be requested to conduct work on this in 2017. It is also likely that the Central Bank will consult further with Industry on the issue of disclosure of fees and charges, with a focus on examining how investment funds could improve disclosure of fees and charges to investors, in a manner that provides them with sufficient information when considering their investment options. This information will inform the Central Bank’s contribution and input into the wider European initiatives on this matter.
- Following its Themed Review of Share Classes in 2016, the Central Bank has identified items requiring follow-up action, such as, hedging activity where the objectives behind the hedging policy are not transparent and will be following up with those individual funds in 2017.
- In line with the Central Bank’s Strategic Plan 2016 – 2018, supervisory activities for entities deemed to be low impact under PRISM will be increased over time and those fund managers and investment funds currently categorised as low impact will be subject to increasing amounts of engagement and onsite inspections by Central Bank supervisors.
- Depositary On-site Inspections: work in 2017 will specifically focus on how depositaries are carrying out their safe-keeping and oversight obligations in the light of the detailed requirements introduced under AIFMD and UCITS V.
- Full Risk Assessments: will be carried out on selected investment funds. Certain factors will increase the likelihood of a particular fund being selected, including for example (i) where investor complaints have been received, (ii) situations where other issues or additional market intelligence have been brought to the Central Bank’s attention and (iii) other specific areas which the Central Bank has highlighted previously as areas of focus, e.g., Directors’ Time Commitments.
- Two Thematic Inspections: are currently being scoped however, the intention is that one of these reviews will focus on late filings of returns by regulated entities.
- Other Initiatives:
- Automation of the Authorisation Process for Funds – The next component of Orion is scheduled to go live in February 2017. This will mean that approximately eighty per cent of investment fund applications will be processed using the new system. This new system does not change the approach of the Central Bank to reviewing relevant documents and Central Bank staff will continue to perform an in-depth review of fund documentation, particularly for retail investment funds. However, the new system improves the quality and efficiency of the authorisation process through the use of online applications and automated workflows which should ultimately improve authorisation turnaround times.
- The Central Bank is also considering the introduction of Application Fees to assist in covering the costs of processing applications.
- Streamlining Reporting Requirements: The Central Bank plans to conduct a review to evaluate the current system of regulatory reporting and consider options for streamlining and consolidating reporting requirements.
*Irish Funds Breakfast Briefing 13 January 2017 and Central Bank’s Independent Fund Directors Briefing 16 January 2017.
AIFMD: Updated Rulebook, Q&A and Forms
The Central Bank has published the latest version of the AIF Rulebook dated March 2017.
On 13 March 2017, the Central Bank also published the twenty-fourth edition of the AIFMD Q&A, with amendments made to ID 1021, Depositary Services. This amendment was made as a consequence of the publication of the Central Bank (Supervision and Enforcement Act) 2013 (Section 48(1)) (Investment Firms) Regulations 2017. ID 1021 clarifies that entities authorised under the Investment Intermediaries Act, 1995 may be appointed by an AIFM to provide certain services without prior authorisation. However, as was previously the case under Chapter 1 of the Prudential Handbook for Investment Firms, Regulation 4 of the Investment Firms Regulations, 2017 provides that an entity must consult with the Central Bank prior to:
- Engaging in any significant new activities; or
- Establishing new branches, offices or subsidiaries; and
- Introducing material changes to the firm’s operating model
The Central Bank has also revised its Orion Retail Investor AIF (standalone and sub-fund) Application Forms. See here.
UCITS: Updated Q&A and Forms
On 13 March 2017, the Central Bank published the sixteenth edition of the UCITS Q&A. Existing question, ID 1056 – Central Bank (UCITS) Regulations- Transitional arrangements, is amended as a consequence of the publication of the Central Bank (Supervision and Enforcement Act) 2013 (Section 48(1))(Investment Firms) Regulations 2017; clarifying that fund administrators are now subject to Parts 2-5 of those Regulations.
The Central Bank has also revised its Orion UCITS (standalone and sub-fund) Application Forms.
Investment Firms Regulations 2017 Q&A and Guidance
Following the entry into force of the Central Bank (Supervision and Enforcement) Act, 2013 (Section 48 (1)) (Investment Firms) Regulations, 2017 (the Regulations), the Central Bank has published associated Guidance and Q&A.
Contributed by Audrey Giles