Irish Central Bank updates fund authorisation and service provider approval process

The changes include a dedicated section setting out information on the process for requesting a derogation for undertakings for collective investment in transferable securities (UCITS), retail investor authorised investment funds (AIFs), and qualifying investor AIFs.

The CBI has also issued new guidance on how investment managers, investment advisers, and non-EU AIF managers are to be reviewed and approved by them. According to the new guidance, each application in respect of a non-EU investment manager, must now include an attestation letter from the board management company designated to act for it or if there is none, from the board of a fund.

The letter must confirm that the fund has carried out due diligence checks on a proposed investment manager as well as proof that they are appropriately regulated and are not subject to legal proceedings. Funds must also demonstrate that the proposed investment manager has the required level of share capital and has no contingent liabilities. It must also show that the fund’s board, or the management company designated to act for it, is in a position to effectively monitor the investment manager’s compliance with the relevant fund documentation and all regulatory and legislative requirements.

The CBI said it would require “a full explanation” for cases where a fund is unable to provide the necessary confirmations of an investment manager’s suitability but still wishes to appoint them. It said such applications will be considered on a “case by case basis” as part of a more detailed review process.

The bank said it recognised the “benefit in having clarity and transparency related to authorisation processes and procedures” adding that the updates would help “keep industry participants up to date on various processes applicable to the area.”

Gayle Bowen, asset management and investment funds expert at Pinsent Masons, said “clarity on the process” and a “commitment from the CBI to address derogation requests in a timely manner” was largely welcomed by the Irish funds industry.

“It would, however, also have been helpful for the bank to release an expedited process for the more ‘standard’ requests and to provide a specific timeline for non-standard requests, though this may follow once the new process is in place,” Bowen added. She also advised that “the attestation is a new requirement that needs to be carefully considered by the managers appointing these delegates and could impact in terms of how investment managers will be appointed in the future”.

The website changes were carried out in the context of a wider review of fund authorisation, according to the CBI. The review, which is already underway, will involve analysis of authorisation processes related to UCITS and retail investor AIFs, as well as authorisation processes for qualified investor AIFs.

Both reviews are expected to be completed later this year.