Ireland update

COVID 19

In April, the Central Bank published a new webpage containing guidance on the specific areas where it afforded regulatory flexibility in respect of certain obligations imposed on securities markets, investment management and investment firms in light of the challenges posed by COVID-19. These included providing in-scope investment firms, fund service providers and investment funds with time-limited extension periods within which to submit certain reports such as annual audited accounts, interim financial statements and capital adequacy reports to the Central Bank. It also confirmed that it expected investment firms and fund service providers to be in a position to meet existing Risk Mitigation Programme implementation dates, noting that any difficulties in meeting submission dates should be raised with the relevant supervisor within the Central Bank. This publication also informed stakeholders that the Central Bank would delay updates to its domestic regulatory policy frameworks in respect of investment firms, fund service providers and investment funds as well as delaying the publication of its feedback statement arising from its consultation on the treatment, correction and redress of errors in investment funds. This webpage was subsequently updated to outline the Central Bank’s expectations on due diligence arrangements and periodic on-site visits by fund administrators, depositories and fund management companies on their delegates or outsourcing partners during COVID-19 in which it confirmed that while travel restrictions remain in place, due diligence monitoring may be carried out remotely. It advised that where due diligence of the delegate or outsourcing partner is difficult to achieve remotely, such entities must consider what other steps could be taken to mitigate the risks arising from this.

In April, the Central Bank also issued an industry communication outlining measures applicable to investment funds in light of the ongoing uncertainty in light of COVID-19. In this, the Central Bank outlined that it expected fund management companies to assess whether funds under management had appropriate liquidity management tools in place, taking into account dealing frequency, investment strategy, portfolio composition and investor profile. It confirmed that updates to fund documentation should be made and investor communications issued in the event that the suite of liquidity management tools was extended beyond those already detailed in fund documentation. Noting that certain investment restrictions could be breached beyond the control of the management company due to market volatility caused by COVID-19, it confirmed that such breaches should be reported to the Central Bank in the normal manner and remedied as a priority objective, taking due account the interests of investors. Where risks posed by COVID-19 could materially affect an investment in a fund which was not already covered by existing risk disclosures, fund management companies should consider revising the fund’s prospectus to address same.

The Central Bank also launched a COVID-19 FAQ webpage for regulated firms in which the Central Bank confirmed that positions which have arisen as a result of illness and which cannot currently be filled on a permanent basis due to COVID-19 could be filled on a temporary basis without having to go through the Central Bank pre-approval process. This webpage also outlines the steps the Central Bank expects supervised firms in the area of money laundering/counter terrorist financing during COVID-19.

During the period under review, the Central Bank also confirmed that it would apply the measures outlined in the various COVID-19 statements made by ESMA as well as applying the measures outlined in various statements published by the ESAs including those on the application of the prudential framework on targeted aspects in the area of market risk in the area of market risk in the COVID-19 outbreak and on additional supervisory measures in the COVID-19 pandemic. It also adopted the deadlines announced by the ESAs for bilateral margining under EMIR.

Adoption of ESMA Guidelines on Liquidity Stress Testing in UCITS and AIFs

On July 13, 2020, the Central Bank published a Notice of Intention in which it confirmed that it will consult in due course on updating the domestic regulatory framework to impose an obligation that UCITS management companies, AIFMS and depositaries adhere to the ESMA Guidelines. In the interim, the Central Bank expects such entities to comply in full with the ESMA Guidelines from September 30, 2020. The Central Bank also published a revised edition of its UCITS Q&A and AIFMD Q&A to incorporate new questions relating to the ESMA Guidelines in which it confirms that it expects liquidity stress testing to generally be conducted at least quarterly and that it should be conducted at all stages in a UCITS/AIF lifecycle, including the design phase.

Stress Testing Scenarios applicable to MMF

On May 1, 2020, the Central Bank published a Notice of Intention outlining that the Central Bank expects full compliance with the ESMA Guidelines on Stress Test Scenarios under the MMF Regulation from May 4, 2020.

Beneficial Ownership Regulations

In July, the European Union (Modifications of Statutory Instrument No. 110 of 2019)(Registration of Beneficial Ownership of Certain Financial Vehicles) Regulations were published which provides for the creation of the Central Register of Beneficial Ownership of ICAVs, Credit Unions and Unit Trusts which will be maintained by the Central Bank. Existing ICAVs, credit unions and unit trusts must file relevant information on beneficial owners with the Central Bank by December 25, 2020 with new entities which come into existence on or after June 25, 2020 having six months from the date of coming into existence to file the relevant information with the Central Bank. Helpfully, the regulations confirm that the 25 percent threshold applicable to the identification of the ultimate beneficial owner of corporate entities under existing legislation now also applies to investment funds structured as unit trusts.

The Central Bank subsequently published a new webpage in respect of the Register of Beneficial Ownership of ICAVs, Credit Unions and Unit Trusts maintained by it.

Author: Donnacha O’Connor, Partner at Dillon Eustace