CP86 Fund Management Company Rules | KPMG | IE

CP86 Fund Management Company Rules

CP86 Fund Management Company Rules

Central Bank of Ireland issues final CP86 Rules.

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Background

With the issuance of its third and final feedback statement on the effectiveness of fund management companies of Undertakings in Collective Investment in Transferable Securities (UCITS) and Alternative Investment Funds (AIFs), the Central Bank has provided a clear picture of its expectations and the nature of the arrangements that need to be put in place.

The issuance of these final rules and guidance follow on from a third consultation paper issued in June 2016. Two earlier consultation papers (CP86) issued in 2014 and 2015 led to the publication of guidance on a number of key areas including delegate oversight, organisational effectiveness and directors’ time commitments. This final feedback statement sets out rules and guidance on other key areas including managerial functions, various operational issues and procedural matters.

The new rules include a final determination on a controversial proposal on the location of directors and Designated Persons carrying out managerial functions and others including the streamlining of managerial functions to six managerial functions, the performance of the organisational effectiveness role and the rule on retrievability of records. They will be included in amended Central Bank UCITS Regulations and in forthcoming Central Bank AIF Regulations and will take effect from 1 July 2018.

The final guidance amalgamates the earlier guidance on delegate oversight, organisational effectiveness and directors’ time commitments with new guidance on managerial functions, various operational issues and procedural matters.

It is apparent that the accountability of directors and Designated Persons is a key area of focus for the Central Bank. In putting this effectiveness framework in place, it is seeking to improve fund governance, compliance and supervisability, whilst giving funds more flexibility in sourcing directors and Designated Persons.

Fund management companies are defined as either a UCITS management company, an authorised Alternative Investment Fund Manager, a self-managed UCITS investment company or an internally managed AIF which is an authorised AIFM, all of which have been authorised in Ireland.

Existing fund management companies are advised to look closely at how this new guidance and the new rules will impact on their operations, while new fund management companies will need to ensure that their application for authorisation to the Central Bank demonstrates compliance with the basic tenets. We are here to assist you and discuss potential impacts on your organisation and can provide insight on complying with these new requirements.

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