The Central Bank of Ireland UCITS (Amendment) Regulations 2017 

On the 27th of July 2017 the Central Bank of Ireland (“CBI”) signed S.I. No. 344 of 2017, the CBI UCITS (Amendment) Regulations 2017 (the “Amending Regulations”) which is now in force. The Amending Regulations give legislative effect to certain technical changes and in this update we discuss two of these changes. 

Impact on annual and semi – annual reports

UCITS Annual and Semi-Annual Reports are now permitted on a statutory basis to disclose open financial derivative positions on a condensed basis “where the volume of positions is high”. 

Details which are required in a condensed portfolio statement are contained in the CBI UCITS (“Amendment”) Regulations 2017.  

What does the CBI consider as a high volume of open financial derivatives positions? 

The Guidance on UCITS Financial Derivative Instruments and Efficient Portfolio Management was updated and published on the 4th of August 2017 to include an explanation: 

“UCITS are guided to consider that where the volumes of open financial derivative positions results in more than five A4 pages, this can be taken to meet “where the volume of positions is high”.

Impact on CP86 fund management company guidance

The CBI has tweaked its “location rule” for directors and designated persons of UCITS management companies by including an additional subjective clause giving it the discretion to allow for the appointment of directors and designated persons who are located in certain non-EEA countries.

The Amended Regulations put the “location rule” which is set out in the Fund Management Companies Guidance (‘CP86’) on a statutory footing and provides additional flexibility to the “location rule” in stating that ( depending on the PRISM rating of the management company)  at least half of its directors and half of the managerial functions must be performed by designated persons in the EEA or “such other country as the Bank may, taking into account criteria regarding effective supervision” determine. 

While the UCITS CBI Regulations and the Amended Regulations apply to UCITS management companies and self – managed UCITS and not AIFM’s authorised under AIFMD it is worth considering that the Amended Regulations could suggest a relaxation of the CBI’s “location rule”. The Amended Regulations does demonstrate potential flexibility in terms of the CBI’s approach to the location of directors and designated persons. The introduction of any flexibility into the “location rule” could benefit global firms as well as UK managers. The Amended Regulations have also put on the statutory footing the requirement that from the 1 July 2018 the records of a management company must be “immediately retrievable in or from the state”. 

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