Ireland: Funds Quarterly Legal And Regulatory Update: 1 October 2023 To 31 December 2023

1. APPROACHING DEADLINES ^1,2

2. UCITS & AIFMD

2.1 Central Bank clarifies rules relating to the use of wholly-owned subsidiaries or co-investment vehicles by Irish QIAIFs and provision of loans by the QIAIF to such entities

On 27 November 2023, the Central Bank published the 49th edition of its AIFMD Questions and Answers document in which it provided further clarity on the ability of Irish QIAIFS to use wholly-owned subsidiaries or co-investment vehicles (Revised AIFMD Q&A).

The Revised AIFMD Q&A includes three new questions (and related answers) which confirm the following:

• A wholly owned subsidiary or company should be considered as being established by the QIAIF where it is being used by the QIAIF for investment purposes, including in circumstances where the wholly owned subsidiary existed prior to the establishment of the QIAIF.
• Any such wholly owned subsidiary or company established with the intention of a QIAIF using it for investment purposes can itself establish or participate in the establishment of another vehicle that is also being used for investment purposes, provided that the Central Bank's rules on subsidiaries as set out in the AIF Rulebook and the Revised AIFMD Q&A are complied with;
• It is possible for a QIAIF to invest through a co-investment vehicle that includes other third party investors and which is not a wholly owned subsidiary of the QIAIF/RIAIF provided that the specific conditions set down in the Revised AIFMD Q&A are complied with.

In a previous edition of the Central Bank's Q&A on AIFMD published on 1 November 2023, the Central Bank confirmed that the provision of a loan by a QIAIF to its wholly owned subsidiary or to a co-investment vehicle in which it has a majority interest does not trigger the application of the Central Bank's QIAIF loan origination rules provided that such lending is ancillary to the QIAIF's predominant investment strategy. It also confirmed the circumstances in which the Central Bank may exempt an Irish investment limited partnership from the provisions of the European Union (Qualifying Partnerships: Accounting and Auditing) Regulations 2019.

A copy of the Revised AIFMD Q&A is available here.

2.2 Amendments to Irish UCITS Regulations and Irish AIFM Regulations

On 12 December 2023, statutory instruments amending (i) the European Union (Undertakings for Collective Investment in Transferable Securities) 2011 as amended (Irish UCITS Regulations) and (ii) European Union (Alternative Investment Fund Managers) Regulations 2013 as amended (Irish AIFM Regulations) respectively were published on the Irish statute book.

In the case of the Irish UCITS Regulations, the provision relating to the treatment of fund assets in the event of the insolvency of the depositary or a third party sub-custodian located in the EU which is custodying the assets of the UCITS has been revised to rectify a previous inconsistency with the corresponding UCITS directive.

In the case of the Irish AIFM Regulations, the same provision has been revoked in its entirety in order to align with the AIFMD directive.

A copy of the statutory instrument amending the Irish UCITS Regulations is available here.

A copy of the statutory instrument amending the Irish AIFM Regulations is available here.

3. CENTRAL BANK OF IRELAND

3.1 Central Bank issues Dear Chair letter on asset valuation to Irish fund management companies

On 14 December 2023, the Central Bank issued a "Dear Chair" letter to all Irish fund management companies in which it set out its key findings and observations arising from its common supervisory action it carried out on certain UCITS management companies on asset valuation in 2022.

These include:

• ensuring that the results of liquidity stress testing and scenario analysis are incorporated into the relevant liquidity management framework;
• ensuring that firm-specific valuation policies and procedures are documented and detail the clear allocation of all operational roles and responsibilities involved in the valuation process;
• ensuring that the valuation policies and procedures are subject to review by senior management at least annually; and
• ensuring that a formalised and comprehensive errors procedure is in place to ensure remedial action is taken as and when valuation or NAV calculations occur which should also be reviewed at least annually.

The letter requires all Irish fund management companies to conduct a review of their existing asset valuation frameworks by 30 June 2024 to ensure that such frameworks are fit for purpose and adhere to all relevant legislative requirements, including the expectations of the Central Bank as outlined in its letter.

A copy of the Dear Chair letter is available here.

To view the full article, click here.

Footnotes

1. The "Approaching Deadlines" section does not include filing requirements in respect of any filing where the filing date is determined with reference to the relevant entity's annual accounting date (such as the filing of annual and semi-annual financial statements with the Central Bank) nor does it address any tax-related deadlines to which funds and fund management companies may be subject. Periodic reviews of matters such as the risk management framework, business plan and policies and procedures of fund management companies as well as any other actions required to be taken under the Irish Funds Corporate Governance Code are also excluded from the remit of this section as the dates for completion of same are determined by the relevant fund management company/fund rather than being set down in relevant legislation or guidance.

2. To the extent that they have not already done so, funds falling within the scope of Article 8 or Article 9 of the SFDR must file updated pre-contractual annexes contained in Commission Delegated Regulation 2023/363 which contain additional disclosure obligations relating to exposure to Taxonomy-aligned fossil gas and nuclear energy economic activities with the Central Bank "as soon as possible and at the earliest opportunity".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.