In May 2013, the Central Bank of Ireland introduced new requirements in the UCITS and Non-UCITS Notices requiring the board of directors of a management company or self-managed investment company to include a confirmation in relation to connected party transactions in the annual and where relevant, the half-yearly reports. These requirements also appear in the AIF Rulebook.

These reporting obligations apply to reporting periods commencing after 30 April 2013.

Connected Party Transaction Requirements

Arm’s Length Transactions

The Notices require that any transaction carried out with a UCITS or non-UCITS by a promoter, manager, trustee, investment adviser and/or associated or group companies of these (“connected parties”) must be carried out as if negotiated at arm’s length. Any transaction of this nature must be in the best interests of the share/unitholders. The AIF Rulebook has the same requirements in relation to an AIF save that it defines connected parties as the management company, general partner, depositary, AIFM, investment manager or delegates or group companies of these.

Annual / half-yearly Report

The annual and half-yearly reports of UCITS, Non-UCITS or AIFs must state whether:

• The board of directors is satisfied that there are arrangements (evidenced by written procedures) in place, to ensure that the obligations set out above are applied to all transactions with connected parties
• The board of directors is satisfied that transactions with connected parties entered into during the period complied with the obligations set out above.

While the requirements to carry out connected party transactions at arm’s length and in the best interests of share/unitholder are not new, the board of directors is now required to confirm compliance with these regulatory requirements.

The IFIA has produced a paper to assist funds in preparing written procedures around the Central Bank’s connected party transactions requirements.

Contributed by Nicola Doran