IRELAND: Central Bank of Ireland Publishes Tenth Edition of UCITS Q&A

Tuesday December 1 2015

On 30 November 2015, the Central Bank of Ireland published a tenth edition of the UCITS Q&A.  New Question ID 1058 has been added and ID 1050 concerning Central Bank (UCITS) Regulations has been amended.

ID 1058

Question: Regulation 78(2) of the Central Bank UCITS Regulations provides:

“(2) The responsible person shall ensure that:

(a) the first annual or half-yearly report be prepared within 9 months of the launch UCITS and shall be published and submitted to the Bank within 2 months if half-yearly or 4 months for annual; and

(b) the first annual report shall be submitted to the Bank within 18 months of the incorporation or establishment of that UCITS and shall be published within 4 months.”

Are the dates in Regulation 78(2)(b) correct?

Answer: There is an error in Regulation 78(2)(b) which should provide as follows:

“(b) the first annual audited report be prepared within 18 months of the incorporation or establishment of the UCITS and shall be published and submitted to the Bank within 4 months”

ID 1050

Question: Regulation 9(4) of the Central Bank UCITS Regulations provides that a ‘responsible person shall not invest assets of the UCITS in a financial index where a single component’s impact on the overall return of that index exceeds the diversification requirements set out in Regulation 71 of the UCITS Regulations’. The Central Bank had, in Guidance Note 2/07, stated that a UCITS proposing to use a financial index comprised of eligible assets with concentrated levels in excess of that permitted by the Regulations, may, applying a look through approach, consolidate the constituents of the index with the assets held directly by the UCITS to ensure it meets the risk-spreading requirements of the Regulations. Is the Central Bank continuing to adopt this position in light of Regulation 9(4)?

Answer: Regulation 9(4) follows the ESMA guidelines on ETF and other UCITS issues where each financial index must meet the relevant criteria and no look through can be applied. Accordingly, it is not possible to treat such investments as a look through of a financial index. However, this is without prejudice to Article 9(2) of the Eligible Assets Directive (Commission Directive 2007/16/EC) which allows investments in financial derivatives whose underlyings are eligible assets with concentration levels in excess of that permitted by the UCITS Regulations to be regarded as financial derivatives on a combination of assets.

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