The Irish Minister for Finance has issued the European Union (Alternative Investment Fund Managers) (Amendment) Regulations 2014 which effect the following changes to the Irish Regulations which implemented the AIFMD and UCITS Directive, respectively, into Irish law:
- UCITS management companies, UCITS investment companies and AIFMs shall be required to avoid relying solely or mechanistically on credit ratings or using them as sole parameters when assessing risk involved in investments made by UCITS or AIFs
- The Central Bank of Ireland shall be required, taking into account the nature, scale and complexity of a UCITS’ or AIF’s activities, to:
- Monitor the adequacy of the credit assessment processes of the UCITS management company, UCITS investment company or AIFM (as the case may be)
- Assess the use of references to credit ratings in the UCITS’ or AIF’s investment policies and, where appropriate, encourage mitigation of the impact of such references, with a view to reducing sole and mechanistic reliance on such credit ratings
- An external AIFM authorised to provide MiFID type services shall be required to comply with the client asset requirements issued under the Irish regulations which implemented MiFID
- An AIFM must apply to the Central Bank for approval before marketing to retail investors in Ireland
In addition, the Regulations provide that AIFMs may be required to contribute, by way of an annual levy, to the Irish Investor Compensation Scheme.
Next steps
The provisions of the Regulations regarding the use of credit ratings will take effect on 15 December 2014. The Central Bank has yet to confirm if the AIF Rulebook and UCITS Notices will be updated to reflect the requirements of the Guidelines.
Contributed by Niall Crowley
