IRELAND: CBI Publish Consultation in Relation to Amendments to UCITS Regulations

Thursday May 10 2018

The Central Bank has published a consultation paper (CP 119) which proposes amendments to (and consolidation of) the Central Bank UCITS Regulations, enacted initially in 2015 and subsequently amended in 2016 and in 2017. Collectively they contain Irish rules in relation to UCITs, replacing the old Notices and supplementing the 2011 UCITS Regulations, which enact the UCITS Directives.

The amendments relate to;

Management Company/Depositary unaudited accounts

CP119 proposes new requirements for management companies and depositaries to prepare a full 12 month set of unaudited accounts, instead of a second set of half-yearly accounts. The full year unaudited accounts need to be submitted to the Central Bank within one month of the relevant period with the half-yearly accounts still being submitted within two months of the relevant period.

Temporary suspension of redemptions

The proposal is that UCITS will have to notify the Central Bank when they temporarily suspend redemptions, will have to keep the Central Bank updated and notified when the temporary suspension is lifted.

CP86

The new UCITS Regulations will provide for the requirements under CP86 to establish and monitor an email address for regulatory correspondence and to keep records that are immediately retrievable in or from Ireland.

ESMA requirements to amend UCITS Share Class Provisions

The consultation proposes a number of new requirements, based on ESMA’s Opinion on Share Classes of UCITS, including:

• That under-hedged positions should not fall below 95% of the net asset value of the share class;
• Stress-testing should be conducted at share class level in accordance with the new UCITS Regulations and the results provided to the Central Bank;
• The relevant share class should bear the administrative costs for the establishment of a share class and should also bear the risk and administrative costs arising from a derivative overlay being used to hedge the currency risk in a share class;
• The notional of a derivative transaction should not lead to a payment or delivery value exceeding that of the hedged share class;
• Counterparty risk should be assessed at the level of the hedged share class.

UCITS Performance fees

CP 119 proposes including the provisions relating to UCITS performance fees which are currently set out in the form of Guidance on its website in the new UCITS Regulations. A new regulation setting out disclosure obligations in the prospectus in relation to performance fees has also been proposed. In addition, a new regulation now also includes a requirement relating to a minimum annual frequency for crystallisation of performance fee in order to align the Central Bank’s position with IOSCO Good Practices on Fees and Expenses.

MMFR

The MMFR will apply to all money market funds (MMFs) – UCITS and AIFs – from 20 July 2018. Existing MMFs will be subject to a transitional period until 21 January 2019. The Central Bank is updating the UCITS Regulations to comply with the MMFR.

Stakeholders are invited to submit comments on the proposed changes by 29 June 2018