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Matheson CP86 Event: Preparing Fund Management Companies for Onsite Inspections

AUTHORs: Shay Lydon, Tara Doyle Services: Asset Management and Investment Funds DATE: 28/11/2019

In Matheson’s final Knowledge Insights session of 2019, our guest keynote speaker and panellist Daniel Lawlor of Aquest and Matheson partners Tara Doyle and Shay Lydon discussed the Central Bank of Ireland (“Central Bank”) thematic review of the implementation of its rules and guidance for fund management companies (“FMCs”) – known as CP86 - and the future regulatory landscape for FMCs.

Matheson CP86 Event Podcast November 2019 MP3 | 11.21 MB

The panel discussion examined the themes that have emerged to date from phase 1 and phase 2 of the thematic inspection, consisting of a questionnaire issued to all FMCs in late June 2019 and a desktop review examining documentation submitted by a number of selected FMCs in August.  The June questionnaire was essentially an information gathering exercise by the Central Bank, with questions focused on:  (a) the independence of directors; (b) resourcing – in particular whether the person performing the organisational effectiveness role had challenged resourcing and when was the last review of resourcing; (c)  the time commitment of designated persons; and (d) delegate oversight.

The Central Bank’s document requests sought documentation relating to the delegation of the investment management function and the risk management function in particular, as well as requesting terms of reference and extracts of board minutes evidencing the discussion and approval of the launch of funds and sub-funds, indicating that the Central Bank will look for robust discussion and challenge by the board regarding the approval of funds.

The Central Bank has indicated that it will commence the phase 3 onsite inspections in November 2019 and they will conclude in Q1 2020.  The panel discussed the likely outcome of the thematic review, including the probability of a “Dear CEO” letter setting out best practices, any inadequate practices identified, recommendations and a timeframe for complying with those recommendations.   Risk mitigation programmes or RMPs are also a likely outcome.

The thematic review may present specific challenges for “legacy management companies” or those management companies who have not been authorised within the past two to three years, particularly in relation to resourcing.  The Central Bank has indicated that it will expect all management companies to comply with its rules and guidance for fund management companies and therefore legacy management companies will be expected to increase the time commitments of designated persons to bring them into line with the more recently authorised FMCs.

Broadening the discussion, the panellists also looked at the interaction of the Central Bank’s rules and guidance for FMCs with its proposed Senior Executive Accountability Regime (“SEAR”), noting that the requirement for FMCs to allocated designated persons to regulatory obligations is very similar to the proposed responsibility mapping that will be a core feature of SEAR.

For further information on the points discussed at the event, listen to this Aquest podcast co-hosted by Daniel Lawlor and Brónagh Maher, professional support lawyer at Matheson and moderator of the panel discussion.

Our “CP86 and Irish Fund Management Companies” event forms part of the Matheson Knowledge Insights series. Knowledge Insights is a programme of education and training events designed to keep our clients up to date on the latest and emerging legal, regulatory and business developments. Each event provides direct access to the knowledge and legal expertise of Matheson partners, the members of our PSL Faculty, business management and industry experts. For more information, please contact the team at: Matheson Knowledge Insights.