On 28 May 2012 the Central Bank published Consultation Paper No. 59 ("CP59") which proposed changes to the regulatory reporting requirements for Irish funds. The Central Bank invited comments on the proposals and issued its feedback statement on 11 October 2012. Changes in the reporting regime will be introduced imminently and the purpose of this briefing is to explain how the changes will affect Irish funds in the new regime.
CP59 set out the Central Bank's proposals for a number of changes to the existing regulatory reporting regime for funds. Various existing filings made with the Central Bank and two new returns will be submitted through an online reporting system ("ONR system") rather than in hard copy, as is currently the case.
Despite objections raised by industry that some of the proposals were costly and burdensome, the Central Bank has decided to proceed as outlined in CP59.
Summary of the proposed changes
Annual and interim financial statements:
The submission of financial statements will be required to be made online in pdf format using the ONR system. Under the new submission process the financial statements will need to be accompanied by a questionnaire relating to the financial statements which is to be completed on-line. A shortened questionnaire will be required for interim financial statements. The questionnaires will typically be completed by the selection of relevant responses from a series of drop-down menu options. The Central Bank will pre-populate parts of the questionnaire relating to the identification of the fund and its service providers (as appropriate) based on the information already available to the Central Bank.
At present, the Central Bank is working towards having the ONR system operative by March 2013. The Central Bank has indicated that annual financial statements for 31 December 2012, due to be filed with the Central Bank by 30 April 2013, will need to be filed via the ONR system.
In addition, the fund's auditor will be required to submit, through the ONR system, a statutory duty confirmation return within one month of the date of the signed report of the auditor included in the fund's annual financial statements.
Annual financial derivatives instrument report (UCITS only)
The submission of the annual FDI report on the ONR system is considered separate to the submission of the annual financial statements. Under the new submission process the annual FDI report will need to be accompanied by a questionnaire (completed for each sub-fund) on the sub-fund's utilisation of FDI during a financial reporting period.
A number of fields in the questionnaire require information which is, in some cases, in excess of that currently provided in the annual FDI report pursuant to the Central Bank's Notices and Guidance Notes. For example, the questionnaire will require a minimum, maximum and median figure in terms of the utilisation of the VaR limit during the year whereas the annual FDI report currently only requires year-end VaR numbers to be provided.
Key investor information document
(UCITS only)
The annual update filing of the KIID in mid-February of each year will be required to be submitted online through the ONR system. In addition to the submission of a KIID for each sub-fund a short questionnaire must be completed on-line as part of the return. This questionnaire essentially requires the sub-fund's SRRI is to be inserted into the questionnaire.
As the mid-February deadline for the annual filing of the KIIDs is later than the anticipated launch of the ONR system, the first annual update of the KIIDs will not require the completion of this questionnaire.
Sub-fund profile questionnaire
The annual sub-fund profile return is a new return. It must be filed annually before 30 June. The information in this questionnaire will include, for example, information in relation to dealing frequency, investment strategy and any master-feeder relationships. Once the questionnaire has been completed in the first year, the Central Bank does not envisage many changes to this return on a year-by-year basis. Accordingly, whilst the first return may take some time to complete for subsequent returns, the information previously provided will appear and should help in completing subsequent returns as updates will only be required where changes have occurred since the previous year.
Regulatory report
This is a new return that the custodian will use to report separately from the fund breaches and errors to the Central Bank. Additionally, a fund may use the new return to update the Central Bank on suspensions of net asset value calculations or dealings.
Responsibility for filings
Other than the annual statutory duty confirmation return and regulatory report which will be submitted by the fund's auditor and custodian respectively, the board of directors of the fund (or the management company) will be responsible for ensuring that the relevant returns are made through the ONR system.
Each fund (i.e. board of directors/management company) will receive initial log-ins and passwords to the ONR system. Once the log-ins and passwords have been issued a person of the fund's choosing can be assigned as system administrator. The system administrator is then responsible for issuing and reissuing passwords to those responsible for making the particular return.
The Central Bank considers that it is a matter for the fund to determine who will be responsible for making the relevant return. The fund may use any combination of the following three options to meet its reporting obligations:-
- elect to file the report itself;
- elect to create a log-in for a third party to file any of the reports on its behalf;
- elect to delegate the filings to the administrator and/or legal adviser.
Timing of the changes
As stated above, the Central Bank is working towards having the ONR system operative by March 2013. However, the Central Bank has acknowledged that this is a challenging timetable and may be subject to change. Specific dates with regard to implementation of the new reporting requirements set out in CP59 will be issued in the near future and we will inform you of these dates once they have been set.
The Central Bank has indicated that it will provide training on the ONR system to industry participants once it has been adapted and tested. This may include the production of a training video to cater for persons located outside Dublin.
Conclusion
The introduction of the proposed changes outlined in CP59 will impose additional administrative burdens on funds and their service providers, particularly in the first year of filing returns on the ONR system. This was highlighted by industry in the consultation process. However, the Central Bank considers that the proposed changes and additional reporting requirements will ultimately improve the overall supervisory process.
By its own admission, the timeline for implementation of the changes in the regulatory reporting regime will be challenging for the Central Bank but also for industry. In particular, we recommend that funds with 31 December year ends contact their legal advisers and administrators in order to ensure that necessary arrangements are put in place to facilitate the filing of annual financial statements and related questionnaires using the ONR system in April 2013.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.
