1. AIFMD DEVELOPMENTS
1.1 Central Bank AIFMD Q&A updates – October 2022
On 5 October 2022, the Central Bank of Ireland (the "Central Bank") published the 45th edition of its AIFMD Q&A to include two new Q&As ID's 1154 & 1155 providing clarifications for QIAIFs raising capital under a formally agreed commitment basis in respect of:
- ID1154 on the application of specific investment limits ("QIAIFs which invest more than 50% of net assets in another investment fund"); and
- ID1155 on the loan origination QIAIF leverage rules contained in the AIF Rulebook.
1.2 Central Bank AIFMD Q&A updates – December 2022
On 21 December 2022, the Central Bank published the latest version (46th Edition) of its AIFMD Q&A.
This edition revises Q&A ID 1126, which considers if AIFs in scope of the PRIIPs Regulation (EU) No 1286/2014 are required to file Packaged Retail and Insurance-based Investment Product (PRIIPs) Key Information Document (KID) with the Central Bank. The Q&A sets out the Central Bank's requirement that Retail Investor AIFs which produce PRIIPs KIDs shall file these on an ex post basis. This will include periodic updates to existing KIDs. The first annual reporting of such KIDs will take place in January 2024. Once the reporting requirements are finalised the Central Bank will advise accordingly.
The update also confirms that Qualified Investor AIFs are not required to file PRIIPs with the Central Bank.
1.3 ESMA AIFMD Q&A updates
On 16 December 2022, ESMA published an updated version of its Q&A on the application of the AIFMD.
An additional Q&A is inserted at Section XI "Scope" namely, "Are managers of special purpose acquisition companies ("SPACs") subject to the AIFMD?"
ESMA notes that SPACs are not yet legally defined by EU law, and indicates that that "there are significant variations between the general structuring of relevant vehicles and concrete modalities of their transactions". ESMA has listed tests to make an assessment on a case-by-case basis whether a given SPAC meets the definition of an "AIF" under Article 4(1)(a), or qualifies as a "holding company" under Article 4(1)(o) of the AIFMD, while paying close attention to the elements described in the ESMA Guidelines on Key Concepts of the AIFMD.
2. UCITS DEVELOPMENTS
2.1 Central Bank UCITS Q&A updates
On 21 December 2022, the Central Bank published its latest edition of the Central Bank's UCITS Q&A featuring three new Q&As on PRIIPs KID filing requirements.
- ID 1107 on whether a UCITS which is seeking authorisation or is seeking approval of a new sub-fund and intends to produce a PRIIPs KID and not a UCITS KIID is required to file the PRIIPs KID with the Central Bank on authorisation / approval of the UCITS (and subsequently);
- ID 1108 on whether a UCITS which is seeking authorisation or is seeking approval of a new sub-fund and intends to produce a PRIIPs KID and a UCITS KIID is required to file the PRIIPs KID with the Central Bank on authorisation / approval of the UCITS (and subsequently); and
- ID 1109 on whether an existing UCITS, which produces a PRIIPs KID, is required to file the PRIIPs KID with the Central Bank on 1 January 2023.
The Central Bank also published accompanying website guidance on the PRIIPs KID filing process.
Accordingly, from 1 January 2023, where a UCITS produces a PRIIPs KID instead of a UCITS KIID, a PRIIPs KID and accompanying confirmation in the prescribed form from the responsible person or its legal advisor should be submitted to the Central Bank in the following circumstances:
- prior to the authorisation of each UCITS; and
- prior to the approval of a new sub-fund of an umbrella UCITS.
The Q&As confirm that where an existing UCITS produces a PRIIPs KID, there is no requirement to file the PRIIPs KID with the Central Bank on 1 January 2023. The first reporting/submission of these PRIIPs KIDs to the Central Bank is expected to take place in 2024. Periodic updates to such PRIIPs KIDs will only be required to be filed with the Central Bank after the first reporting exercise. Once finalised, the Central Bank intends to publish further details of the reporting requirements for PRIIPs KIDs.
3. CENTRAL BANK UPDATES
3.1 CP152 on own funds requirements for UCITS management companies and AIFMs authorised for discretionary portfolio management
On 1 December 2022, the Central Bank published a consultation paper, CP152 on own funds requirements for UCITS management companies and AIFMs authorised for discretionary portfolio management (the "Consultation") proposing amendments to the applicable prudential rules.
A UCITS management company or AIFM that meets all of the conditions to be a 'small and noninterconnected firm' will be subject to the own funds requirement set out in Regulation 17 of the UCITS Regulations and Regulation10oftheAIFMRegulationsrespectively. The conditions to qualify asa'small and non-interconnected firm' will be modelled on similar conditions applied under the Prudential Requirements for Investment Firms Regulation (EU) 2019/2033 ("IFR") and are defined in Annex I and Annex II of the Consultation respectively by the proposed insertion of Regulation 100A of the Central Bank UCITS Regulations and the proposed revised Chapter 3 of the AIF Rulebook.
A UCITS management company or AIFM that is not a 'small and non-interconnected firm' will be required to have own funds of, at least the highestof:
- the total amount of initial capital and own funds which the UCITS management companies or AIFM is required to hold pursuant to the UCITS Regulations or the AIFM Regulations, as applicable;or
- a new 'Risk to Client K-Factor' requirement amount calculated in accordancewithproposednew Regulation100AoftheCentralBank UCITS Regulations; or, a proposed amendment to Chapter 3 of the Central Bank AIF Rulebook, whichwillbeimposedasaconditionontheauthorisation of eachAIFM,as relevant.
The Consultation proposes that UCITS management companies and AIFMs that are not small andnoninterconnected firm should also be able to limit the increase in their own funds requirement arising from the introduction of a K-Factor requirement to twice their fixed overheads requirement for the period up to the end of June 2026.
The Central Bank invites stakeholders to provide comments on the proposals outlined within this Consultation. The consultation period ends on 23 February 2023.
Please also refer to our recent advisory on the proposals in the Consultation.
3.2 Dear CEO Letter with follow up findings from thematic review of fund management companies' governance, management and effectiveness (This is a further update to section 3.4 of the report covering the fourth quarter of 2020)
On 7 December 2022, the Central Bank issued a ' Dear CEO' letter (the "Letter") setting out the findings of its recently completed thematic review assessing how Fund Management Companies have implemented the Central Bank's organisational requirements and guidance.
The survey results communicated in the Letter acknowledge that firms have made progress in implementing the actions expected of fund management companies to ensure that they meet the required standards. The Central Bank notes that it has seen encouraging signs that the step change it has sought is starting to take place, but notes that more work is to be done to ensure firms achieve the expected standards.
The Central Bank expects that this letter will be discussed by the Board of fund management companies and that any areas requiring improvement that directly relate to a firm are given due consideration to ensure robust and appropriate governance arrangements are in place.
Please refer to our recent advisory outlining the Central Bank's findings and recommendations contained in the Letter.
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