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Asset Management and Investment Funds Update: Revised Central Bank UCITS Notices and Guidance Notes

PRACTICE AREA GROUP: Asset Management and Investment Funds
DATE: 18.02.2013

Central Bank implements ESMA Guidelines and Clarifies Requirements relating to the Management Company Passport and Organisational Requirements for SMICs

Guidelines on ETFs and other UCITS issues

The European Securities and Markets Authority’s Guidelines on ETFs and other UCITS issues (the “ESMA Guidelines”) come into effect today, 18 February 2013. The Central Bank has implemented the ESMA Guidelines through a series of amendments to the UCITS Notices. Related amendments have been made to Guidance Note 2/07 UCITS Financial Indices and Guidance Note 3/03 UCITS Financial Derivative Instruments. Please see our earlier update for further information on the ESMA guidelines, including transitional provisions. Any new UCITS created on or after 18 February 2013 must comply with the ESMA guidelines immediately.

A copy of the amended UCITS Notices may be accessed here: Amended UCITS Notices.

Guidance Note 4/07 – Operation of the Management Company Passport

The Central Bank has amended Guidance Note 4/07 in order to clarify the requirements an Irish management company needs to fulfil in order to avail of the UCITS IV passporting provisions. The amendments will require management companies to assess how utilising a management company passport would affect the nature, scale and complexity of their business, particularly their organisational structure and resources. The Central Bank will review each management company passport proposal on a case-by-case basis to determine whether the management company is adequately resourced.
The amendments are also designed to ensure that the Central Bank will have effective access to (a) records of any non-Irish administrator that the management company engages and (b) documents and information held by the trustee of a non-Irish UCITS, in order to allow the Central Bank to effectively discharge its supervisory duties in relation to the management company.

UCITS Notice 2 - Organisational Requirements for SMICs

The Central Bank has updated UCITS Notice 2 to reflect its policy that UCITS management companies and self-managed investment companies (“SMICs”) should be subject to the same basic regime while acknowledging that the requirements applicable to SMICs should be considered in light of the less complex nature of a SMIC. In a letter to the Irish Funds Industry Association (“IFIA”) dated

10 August 2012, the Central Bank specified the particular requirements that would apply to SMICs and clarified that SMICs would not be required to have a permanent compliance function or a permanent internal audit function. UCITS 2 has now been amended to reflect this correspondence. In particular, paragraph 95 has been updated to reflect the application of the broader range of requirements to SMICs.

The Central Bank has indicated that it will welcome submissions of updated UCITS IV compliant business plans by SMICs as far in advance of the 1 July 2013 deadline as possible and would like to avoid all submissions being received in the latter stages. The Central Bank will not review all submissions but will carry out a spot checking exercise to establish the level and extent of compliance.

For further information or advice in relation to this matter, we would be delighted to speak with you and to answer any queries you may have. Please contact your usual Asset Management and Investment Funds Group contact in this regard.

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