Third Consultation On Fund Management Company Effectiveness “CP86”

The Central Bank of Ireland (“CBI”) has published its latest update in the CP86 process. This consultation is the follow up to last November’s CBI guidance on delegate oversight, organizational effectiveness and directors’ time commitments for fund management companies.


“Fund management companies” is a broad term and covers UCITS management companies, AIFMs, self-managed UCITS investment companies and internally-managed AIFs.

The consultation closes on 25 August 2016.

The updated guidance covers managerial functions, operational issues and procedural matters. The content is mainly in line with what has been issued to date by the CBI.

Central Bank of Ireland has again said that “it believes that enhancing the effectiveness of fund management company boards improves the protection of investors”.

Focus On: Location Rule Proposal

The CBI is proposing new residency requirements rules for directors and designated persons. The CBI states that the proposed rule is to assist the CBI with access to key personnel and enhance “supervisability”.

Fund management companies will be able to appoint staff from outside Ireland as designated persons overseeing and managing the managerial functions assigned to them. The CBI has defined 6 key managerial functions for fund management companies.

The CBI is proposing to drop its requirement that a designated person, who is not a director, be resident in Ireland. This should be welcomed by fund management companies as it gives them flexibility in terms of the location of the person who holds the position. A designated person can be assigned to a role based on expertise, efficiency and cost – effectiveness not location. The CBI will seek confirmation from the fund management company that the appropriate arrangements for a designated person based outside Ireland are in place and that the designated person can perform their role effectively.

However the CBI has placed the constraint that at least 2/3 of the designated persons and 2/3 of the directors be located in the EEA. It’s proposing to limit the proportion of designated persons and directors located outside the EEA. This is a very relevant point for fund management companies that currently do not have a large presence in Europe, for example a US manager using US personnel for its Irish fund management company boards, this rule could potentially raise serious challenges.

  •  A fund management company which has a PRISM impact rating of Low will be required to have:
    • at least two Irish resident* directors; and
    • at least two thirds of its directors in the EEA; and
    • at least two thirds of designated persons in the EEA.( it doesn’t mention third countries ie. outside the EEA)

*110 working days per year, which is based on half a working year excluding vacation and public holidays.

  • A fund management company which has a PRISM impact rating of Medium Low or above will be required to:
    • have at least three Irish resident directors or at least two Irish resident directors and one designated person based in Ireland; and
    • have at least two thirds of its directors in the EEA; and
    • have at least two thirds of designated persons in the EEA.

To Note:

  1. The consultation also contains a useful checklist setting out the duties and responsibilities of the designated person of each of the 6 managerial functions against the UCITS and AIFMD regimes.
  2. Fund management companies will be required to keep all of their records in a way that they can be immediately retrieved in or from Ireland, and have in place a clearly defined records retention policy.
  3. They also need to have a dedicated email address for communications to and from the CBI which should be monitored daily.

As mentioned above all feedback and responses to this latest consultation need to be submitted by the 25 August 2016.

Implementation of CP86

At the moment this is unclear, once the consultation process has closed and the final guidance has issued the CBI has indicated there will be a one year transitional period for fund management companies to comply.

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