The Irish Stock Exchange ("ISE") has introduced a new Listing Rule 7.54 regarding a fund's ability to hold cash with a credit institution[1] and a new Listing Rule 2.69 with respect to legal and management control to a fund's investment in other investment funds. The additional new rules are effective from 12 June 2012.
New Listing Rule 7.54
Listing Rule 2.52 states
that no more than 20% of the value of the gross assets of a
fund may be:
(a) "Lent to or invested in the securities of any one issuer
(including the issuer's subsidiaries or affiliates)";
or
(b) "Exposed to the creditworthiness or solvency of any one counterparty (including that counterparty's subsidiaries and affiliates)".
The new Listing Rule 7.54(a) provides that this no longer applies to a fund's cash held on deposit with a credit institution provided where the fund deposits cash with a credit institution for its own account, the fund will confirm the following:
- The directors of the fund believe that the placing of
cash on deposit with the credit institution is in the best
interests of the shareholders of the fund and is in line with the
investment policy of the fund.
- The fund will appoint an independent administrator or
other independent entity responsible for carrying out a periodic
reconciliation of the fund's cash position at the credit
institution. The reconciliation should consist of a reconciliation
of the fund's cash position at the credit institution to the
books and records of the independent administrator or other
independent entity based upon receipt of statements of information
from the credit institution. Such reconciliation
should take place in connection with each dealing day and not less
than quarterly. The entity may maintain
independence in one of the following ways: (a) the
entity is not an affiliate of the fund, (b) the entity is a
separate yet affiliated legal entity to the fund that achieves
functional independence through the separation of legal entity
management and the adoption of entity specific controls and
procedures; and
- The placing of cash deposits with a credit institution outside of the fund's custody / prime broker network is restricted to funds that confine investment to professional investors.
Where the amount of cash held on deposit with a credit institution is greater than 20% of the fund's gross assets Listing Rule 7.54(b) will also apply.
Listing Rule 7.54(b) states that the credit institution must satisfy:
- the Specified Credit Rating and Financial Resources Requirement as defined by the ISE; and
- be regulated as a credit institution by a Recognised Regulatory Authority.
It must be noted that Listing Rule 7.54 will not impact funds
regulated by the Central Bank of Ireland. The listing particulars
should also disclose any material risks associated with placing
cash outside of a fund's custodial network.
Listing Rule 7.54(a) will only apply where the account is not held in the name of the custodian.
New Listing Rule 2.69
New Listing Rule 2.69 provides that Listing
Rule 2.53, whereby a fund may not take or seek to take legal or
management control of the issuer of any of its underlying
investments, will not apply to a fund's investment in other
open-ended funds.
For further information
please speak to your usual contact or the individuals listed
above.
Footnote
[1]The term "credit institution" shall have the same meaning as defined in Directive 2006/48/EC. ('Credit institution' means: (a) an undertaking whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account; or (b) an electronic money institution within the meaning of Directive 2000/46/EC (1);)
Originally published 27 June 2012
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
