Asset Management

Asset Management update - July 2017

Central Bank Consultation Paper 111

On 26 July 2017, the Central Bank published a Consultation Paper on the Second Edition of the Central Bank Investment Firms Regulations including changes related to MiFID II – Consultation Paper 111. The Consultation Paper deals inter alia with proposed changes to the Client Asset Regulations (“CAR”) arising as a result of MiFID II together with the integration of those regulations into the Central Bank Investment Firms regulations in line with CP97.

It proposes to avail of the opportunity to integrate into the Central Bank Investment Firms Regulations both the Investor Money Regulations (“IMR”) and the Central Bank rules in relation to the capital requirements applied to market operators as set out in the Central Bank’s feedback statement on CP101.

Finally, some other consequential amendments to the existing Central Bank Investment Firms Regulations are proposed arising out of MiFID II and certain matters that have arisen since the first edition of the Central Bank Investment Firms Regulations became operational. The changes include certain technical amendments in relation to the regulatory requirements applied to Fund Administrators. Find out more.


EU Money Market Reform Regulation

The EU Money Market Reform regulation was published on 14 June 2017. Key areas covered by the MMF Regulation include: 

  • requirements relating to constant net asset value (“CNAV”) MMFs which maintain a stable share price, e.g. €1 or $1 per share;
  • a prohibition on sponsor support;
  • valuations and the use of amortised cost accounting;
  • eligible assets; 
  • investment in securitisations and Asset Backed Commercial Paper (“ABCP”);
  • credit assessment procedures and external ratings;
  • liquidity;
  • diversification;
  • risk management; and
  • disclosure and transparency.

Find out more.


ESMA issues Opinion on Asset Segregation and Custody Services

On 21 July 2017, The European Securities and Markets Authority (“ESMA”) published an Opinion to the European Parliament, the Council and the Commission (“EU institutions”) under Article 34 of the ESMA Regulation. The Opinion sets out suggestions to the EU institutions for possible clarifications of the legislative provisions under both Directive 2011/61/EU (AIFMD) and Directive 2009/65/EC (UCITS) pertaining to:

  1. the asset segregation requirements when safe-keeping duties are delegated by the appointed depositary of a fund (UCITS or AIF); and
  2. the application of depositary delegation rules to central securities depositaries (“CSDs”).

The purpose of the Opinion is:

  1. to provide an EU framework with strong client asset protection, especially in insolvency, for the safe-keeping of assets which are, in accordance with both UCITS and AIFMD Directives, required to be held in custody; and
  2. to provide clarification in the AIFMD and UCITS Directive regarding the application of the depositary rules in the case of CSDs, ensuring a consistent approach across the EU.

Find out more.


Progress on Investment Limited Partnership (Amendment) Bill

The Minister for Finance and Public Expenditure and Reform announced that Government has approved the legal drafting of the Investment Limited Partnership (Amendment) Act. It is hoped that this long-awaited Bill will address the issues which have prevented certain types of funds which typically use a Limited Partnership as their structure of choice (in particular, private equity funds) from setting up in Ireland.  While Ireland has long been a leading funds domicile (across UCITS, ETFs, real estate etc), the existing Investment Limited Partnership structure has long been seen as not fit for purpose for several reasons.  It is hoped that the amendments, to be introduced in consultation with the industry, will address the existing issues and increase the attractiveness of Ireland as a funds domicile for private equity funds.

IREF withholding tax – new refund/exemption mechanism

The Irish Real Estate Funds (‘IREF’) withholding tax was introduced by Finance Act 2016 and applies to ‘chargeable events’ arising on or after 1 January 2017. The rules in relation to IREF withholding tax are quite complicated and their implementation is proving quite challenging in a number of respects for impacted funds/investors/service providers.  Consultation between Revenue and the funds industry remains ongoing in relation to several aspects of the rules.

In this respect, Revenue have published details of advance clearing procedures in relation to the application of refunds/exemption at source for certain investors who would be entitled to refund/exemption in certain circumstances.

Advance clearance will be available to facilitate the following for such exempt investors;

  1. Upfront exemption from withholding tax arising from direct disposal of units (required to be withheld by the purchaser at a rate of 20% where consideration for disposal exceeds €500,000)
  2. Upfront exemption from withholding tax or refund mechanism directly from IREF itself (depending on traceability of relationship) for other chargeable events, such as distributions etc.

These procedures are welcome and should alleviate some of the cash-flow difficulties which would otherwise arise for exempt investors. Work remains ongoing on several other aspects related to the operation of IREF withholding tax and we will keep you updated on developments. For more information visit Revenue