Legal Updates

 Asset Management and Investment FundsJanuary 19, 2021

Asset Management in Ireland: 2021 - A Year in Preview

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For further information on any of the issues discussed in this publication please contact the related contact(s) on this page.


While funds and their management companies1 may still be catching their breath after a particularly challenging year in 2020 dominated largely by COVID-19 and uncertainty around Brexit, 2021 is shaping up to be another busy year for industry stakeholders.

What follows is an overview of some key dates which should be appearing in your compliance calendar for 2021 and a synopsis of some of the legal developments we can expect in the next twelve months.2 3



Action to be taken

5 January 2021

Central Bank Performance Fee Guidance for UCITS and certain types of retail AIFs

The Central Bank expects all new UCITS and in-scope RIAIF4 established after 5 January 2021 or existing UCITS and in-scope RIAIF which amend an existing performance fee or introduce a new performance fee after 5 January 2021 to comply with the Central Bank Performance Fee Guidance for UCITS and certain types of retail AIFs immediately (i.e. from the date of establishment of the relevant fund or from the date of amendment or introduction of the performance fee as the case may be)5.

The Central Bank Performance Fee Guidance is intended to enhance the existing UCITS and RIAIF performance fee regimes in order to implement the ESMA Guidelines on Performance Fees, introduces some new disclosure requirements as well as introducing some new rules on the performance fee methodology and types of benchmarks which can be used (in the case of methodologies which are based on outperformance of a benchmark).

Ensure that any relevant performance fee methodology complies with the Central Bank Performance Fee Guidance from the date of establishment of the relevant fund /date of amendment or introduction of the performance fee as applicable.

19 January 2021

European Commission Consultation on ELTIF closes

The European Commission has launched a public consultation on its proposed targeted review of the existing ELTIF regime. Designed to attract long-term investors who want to put their money towards longer-term investments, it had been hoped that the ELTIF regime would offer a new source of non-bank funding to SME and other companies investing in social infrastructure and transport projects. However very few ELTIF have been established since the creation of the framework and the European Commission is intending to make targeted changes to the existing legislative framework in order to increase the number of funds established under the regime.

If desired, submit a response to the consultation

29 January 2021

European Commission Consultation on AIFMD closes

In October 2020, the European Commission launched its much-speculated public consultation on AIFMD which closes at midnight (Brussels time) on 29 January 2021. This follows its report on AIFMD to the European Parliament and European Council which was published in June 2020 and a letter from ESMA to the European Commission in August 2020 in which ESMA set down nineteen areas of AIFMD which it believed would benefit from reform6. The European Commission is likely to have regard to such recommendations when finalising its legislative proposals amending the AIFMD framework.

Based on the types of questions which are asked in the consultation, the European Commission appears to be considering revising some investor protection provisions including investor categorisation referencing MiFID II (which restricts the use of the AIFMD marketing passport to “professional clients” within the meaning of MiFID II), the revision of valuation rules imposed on AIFMs (taking into account experience of valuation issues arising during COVID-19) and introduction of a depositary passport. It is also considering whether the national competent authorities and AIFMS have tools necessary to effectively mitigate and deal with systemic risk under the existing regime, including the methods in which leverage should be calculated. It has also looked for feedback on whether the thresholds set down in Article 3 which determine the scope of AIFMD to smaller managers are appropriate, whether the existing asset-stripping rules could benefit from revision and whether the rules governing the provision of ancillary services by AIFM should be clarified.

Of particular interest is the European Commission’s continued focus on the adequacy of existing delegation rules applicable to AIFMs which it is concerned permits the use of “letter-box” entities within the EU whereby AIFMs (or indeed UCITS management companies) delegate significant proportions of their activities to non-EU entities. It is considering revising existing rules to impose specific quantitative criteria which must be respected when delegating to a third party or to include a list of core or critical functions that would always be performed internally and may not be delegated to third parties, regardless of where that third party is located.

Under its proposals, the European Commission has indicated its intention to revise the UCITS legislative framework to align it with the revised AIFMD framework in order to ensure that investors in UCITS funds are afforded the same protection as those investors in AIF funds. This is likely to include revision in the areas of delegation and supervisory reporting to competent authorities (which already applies to AIFMs in the form of “Annex IV” reporting). In its letter dated 18 August 2020, ESMA also called on the European Commission to align the two frameworks by imposing the existing “AIFMD Level 2” liquidity management and risk management rules on UCITS management companies.

The European Commission has indicated that it will put forward a legislative proposal amending AIFMD in Quarter 3 of 2021.

If desired, submit a response to the consultation.

31 January 20217

Fitness & Probity Filings for UCITS management companies and AIFMs

Under its fitness and probity regime, the Central Bank requires each regulated financial service provider (“RFSP”) to submit a confirmation to the Central Bank on an annual basis which lists all individuals performing pre-controlled functions (“PCF”) and confirms that each PCF complies with those standards and continues to abide by those standards. In a follow-up Dear Chair Letter in November 20208, the Central Bank re-emphasised the obligation to conduct due diligence on an ongoing basis to ensure that individuals performing any controlled function (including PCF) continue to comply with the fitness and probity regime. In particular it noted that ongoing due diligence was “particularly poor and often limited to an annual self-declaration with no ongoing due diligence screening to check if a change in circumstances had impacted an individual’s fitness and probity”. Please refer to our November 2020 and December 2020 briefings on the Central Bank’s Dear Chair letter.

F&P confirmation to be filed with the Central Bank by 31 January 2021

31 January 20219

Annual confirmation of ownership of UCITS management companies and AIFM

Filing of confirmation of ownership to be made with Central Bank by 31 January 2021.

19 February 2021

Issue and filing of annual KIID update

UCITS management companies must issue revised KIID containing updated performance data for the period ended 31 December 2020 and incorporating any other required revisions and file same with the Central Bank no later than 19 February 2021.

Revised KIID to be issued and filed with the Central Bank by 19 February 2021.

28 February 202110

Fund Profile Return

A fund profile return containing information for each sub-fund or single strategy fund authorised by the Central Bank as at 31 December 2020 must be filed with it via its ONR system no later than 28 February 2021. The Central Bank has issued guidance to assist in making these filings.

Fund Profile Return to be filed with the Central Bank on or before 28 February 2021.

28 February 202111

Fitness and Probity Filings for Investment Funds

Please refer to “Fitness and Probity Filings for UCITS management companies and AIFMs” for further information.

F&P confirmation to be filed with the Central Bank by the date designated by the Central Bank.

8 March 2021

New Validation Rules apply under EMIR

When reporting in-scope trades under EMIR to a trade repository from this date, counterparties will be to observe the updated EMIR validation rules.

10 March 2021

SFDR12 Enters into Force

As readers will be aware from our previous client briefings, all fund management companies are obliged to update fund prospectuses to incorporate sustainability-related disclosures, the extent of which will depend on whether the fund in question constitutes an “ESG fund13” or a non-ESG fund.

Fund management companies are also required to update their websites to provide information on their policies on integration of sustainability risks into their investment decision-making process and whether they consider the principal adverse impacts of investment decisions on sustainability factors. The remuneration policies of such entities must also be revised by that date to explain how such policies are consistent with the integration of sustainability risks. 14

The Central Bank has confirmed that it will operate a fast-track process and self-certification regime in respect of any prospectus updates which address only SFDR. Such prospectus updates, together with the requisite self-certification letter from the UCITS management company/AIFM, should be filed via Filings can be made via this fast-track process from 11 January 2021.

Fund management companies should take appropriate steps to ensure that both prospectus and website disclosures as well as any changes to the remuneration policy are prepared, and approved and issued by relevant board of directors’ (and in the case of prospectus updates, filed with the Central Bank) by 10 March 2021.

End Quarter 1 2021

Management Company Action Plan under Fund Management Company Guidance

As discussed in greater detail in our client briefing, in a letter to industry issued in October 2020, the Central Bank has set down its expectations as to how fund management companies15 should be run, including an expectation that all fund management companies should have at least 3 full-time employees (or equivalent).

It requires all fund management companies to complete an analysis of its findings arising from its thematic review of fund management companies which it conducted during 2019 and 2020. This includes assessing areas including resourcing, the role of designated persons, delegate oversight, the risk management framework, the board approval of new funds and the role of the director responsible for organisational effectiveness.

The Central Bank requires each management company to formulate an action plan to address any deficiencies in its existing framework in light of the Central Bank’s findings. This action plan must be discussed and approved by the board of directors of the relevant entity by the end of Quarter 1 2021.

The Central Bank has indicated that it will continue with its supervisory engagement with entities during 2021 and that it intends to conduct a further “industry wide review” in 2022 to assess the adequacy of actions taken by entities in response to its letter.

Ensure that an appropriate action plan is formulated addressing each of the matters highlighted in the Central Bank’s letter, presented and approved by the Board of Directors by end of Quarter 1 2021.

Accounting Periods Beginning or After 5 July 2021

Central Bank Performance Fee Guidance for UCITS and certain types of retail AIFs

All UCITS funds and specific types of RIAIFs which are subject to a performance fee prior to 5 January 2021 must comply with the Central Bank’s Performance Fee Guidance for UCITS and certain types of retail AIFS16 17 (the “Performance Fee Guidance”) in respect of accounting periods beginning on or after 5 July 2021.18

As noted above, it is intended to enhance the existing UCITS and RIAIF performance fee regimes in order to implement the ESMA Guidelines on Performance Fees, introduce some new disclosure requirements as well as potentially requiring some changes to be made to performance fee methodology used or the benchmark used (in the case of methodologies which are based on outperformance of a benchmark).

Management companies of UCITS funds and in-scope Retail AIF funds which are subject to a performance fee should carry out a gap analysis in good time to determine if any changes need to be made to the calculation methodology and/or investor disclosures to comply with the Performance Fee Guidance for accounting periods beginning on or after 5 July 2021.

31 July 2021

ESMA Guidelines on Cloud Outsourcing

Fund management companies should assess whether they could fall within the scope of the recently published ESMA Guidelines on Cloud Outsourcing (the “Cloud Outsourcing Guidelines”) with respect to all cloud outsourcing arrangements which are entered into, renewed or amended on or after 31 July 2021 and ensure that any such arrangements are implemented in line with the Cloud Outsourcing Guidelines. Requirements include the need to have a defined and up-to-date cloud outsourcing strategy, the need to conduct a full risk assessment of any new cloud outsourcing arrangements and to implement information security requirements. Additional obligations will apply where the cloud outsourcing arrangement concerns a “critical or important function”.

Fund management companies will be required to review and amend any other cloud outsourcing arrangements to ensure compliance with the Cloud Outsourcing Guidelines by 31 December 2022.

Fund management companies should ensure that any new or revised cloud outsourcing arrangement entered into after 31 July 2021 complies with the Cloud Outsourcing Guidelines.

2 August 2021

New Cross-Border Distribution Framework for Investment Funds

Many of the provisions of the Cross Border Distribution Directive19 and a Cross Border Distribution Regulation20, which together introduce a range of new requirements for UCITS and AIFMs relating to the sale of investment funds within the EU, will apply from 2 August 2021.

(i) Rules governing marketing communications

The Cross Border Distribution Regulation sets down specific conditions that all marketing communications addressed to investors must comply with. These include an obligation to ensure that all information contained in marketing communications is fair, clear and not misleading and does not contradict or diminish the significance of information contained in the fund prospectus. They must also provide investors with a hyperlink to a summary of investor rights. Marketing communications21 will also need to comply with ESMA’s finalised guidelines on marketing communications which are expected enter into force on 2 August 2021. The guidelines proposed by EMSA are currently the subject of a consultation process which closes on 8 February 2021.

(ii) Introduction of pre-marketing requirements for AIFMs

The Cross Border Distribution Directive introduces a new concept of “pre-marketing” (whereby an EU AIFM can test investor appetite for a particular investment idea or investment strategy) and sets down the conditions under which an EU AIFM can engage in pre-marketing, including an obligation to notify its own competent authority of within two weeks of beginning pre-marketing activities in another EU Member State. Investors contacted by EU AIFM as part of pre-marketing can only subsequently acquire shares in the AIF once the AIFM has registered the fund for sale to professional investors in the relevant EU jurisdiction via the AIFM marketing passport22.

(iii) De-Registration Requirements

The Cross Border Distribution Directive also introduces new rules which must be followed by fund management companies where a decision has been taken to discontinue the marketing of a fund in an EU jurisdiction. These include for example an obligation to make public the intention to terminate marketing arrangements in the relevant jurisdiction and to allow investors in the relevant jurisdiction the ability to redeem without charge from the relevant fund for a period of at least 30 working days before the shares are de-registered for sale. The fund management company must also notify its own regulator of its intention to stop marketing in the relevant EU Member State(s).

(iv) Facilities for retail investors

Under the new framework, AIFM which are marketing shares of an AIF to a retail investor must now provide local facilities to such investors, in line with the revised requirements which are also applicable to UCITS management companies. The new rules do not require management companies to have a physical presence or to appoint a third party representative, a welcome change for UCITS management companies which to date have had to either have a physical presence or appoint a local facilities agent in any EU Member State where the shares of a UCITS were sold.

Fund management companies should carry out a wholesale review of marketing materials to ensure that they meet the requirements set down in the new cross-border distribution framework. Fund management companies may wish to revise agreements with distributors / financial intermediaries to oblige them to ensure that any marketing communications issued by them relating to funds managed by such management companies comply with the Cross Border Regulation and related ESMA Guidance.

They should also implement appropriate internal procedures to address pre-marketing requirements and potential implications for reverse solicitation (AIFMs only) and de-registration requirements.

1 September 2021

Next initial margin phase-in under EMIR

Covered entities with an aggregate average notional amount (AANA) of non-centrally cleared derivatives greater than €50 billion will be subject to the EMIR initial margin requirements for non-centrally cleared derivatives from 1 September, 2021. By way of relief from this requirement, counterparties below the €50 million initial margin exchange threshold are not required to have all the relevant operational and legal arrangements in place by this deadline. It is expected, however, that covered entities will act diligently when their exposures approach the threshold to ensure that the relevant initial margining arrangements needed are in place if the threshold is exceeded.

Consider whether funds under management fall within initial margin requirements and, where relevant, take steps to ensure compliance with these requirements.

Quarter 4 2021

Preparation for entry into force of certain sustainability-related legislation

(i) Proposed amendments to AIFMD, UCITS and MIFID regimes to address integration of sustainability risks

The European Commission has indicated that it intends that proposed changes to the AIFMD, UCITS and MiFID regimes to incorporate targeted amendments to the (i) organisational requirements, (ii) operating conditions and (iii) risk management rules set down in the UCITS, AIFMD and MiFID frameworks to integrate sustainability risks into the existing frameworks will enter into force in Quarter 4 of 2021.

(ii) Preparation for entry into force of the Taxonomy Regulation

Fund management companies which have in-scope ESG funds23 under management are likely to spend Quarter 4 of 2021 implementing projects to ensure that prospectuses are updated to incorporate information required under the Taxonomy Regulation before the deadline of 1 January 2022. Finalised Level 2 measures relating to these obligations are expected to be presented to the European Commission by 1 June 2021.

(iii) Preparation for entry into force of periodic reporting obligations and Level 2 Measures under the SFDR

Fund management companies with ESG funds under management will need to prepare for the obligation to report on the sustainability-related impact of the relevant fund in its periodic reports which enters into force on 1 January 202224.

Depending on the date of entry into force of the finalised Level 2 measures under the SFDR, fund management companies with ESG funds under management may also need to address amendments to both prospectus and website disclosures required under such Level 2 measures. Fund management companies which have decided to report principal adverse impacts of investment decisions on sustainability factors under Article 4 of the SFDR will also need to monitor the application date of SFDR Level 2 measures.

Monitor developments of relevant legislation and, where necessary, initiate project implementation plans to ensure compliance with applicable legislation by relevant deadlines.

Legislative and Regulatory Developments and Areas of Focus in 2021

Investment Limited Partnership Regime

Amendments to the Investment Limited Partnership Act 1994 were passed into law by the President of Ireland on 23 December 2020 which are intended to make the existing Irish tax-transparent structure more suitable for use by global private equity, venture capital, private debt and real estate firms. As well as modernising the ILP in line with other types of investment fund vehicles, the amendments to the existing ILP regime are intended to incorporate “best in class” features for these type of structures, as outlined in greater detail in our recent client briefing.

The revised Investment Limited Partnership Act is expected to enter into force on 1 February 2021.

Guidance on Share Class Features of Closed-Ended AIF

In November 2020, the Central Bank launched a consultation on proposed guidance on share class features of closed-ended QIAIF in which it outlined draft guidance which tailors some of its existing share class rules for certain closed-ended funds which pursue private equity, venture capital or real estate strategies. Amongst its proposals, it intends to permit excluded/excused investors, to allow the profit, loss and capital of certain assets to be allocated to specific share classes (rather than all share classes), to permit participation of the investment management function in the relevant QIAIF, stage investing and the issue of shares at a price other than NAV. A more detailed analysis of the Central Bank’s proposals is available here. The Central Bank has also confirmed that that the general partner of a partnership will not require a separate regulatory authorisation25.

The new guidance is expected to be published by the Central Bank in the course of Quarter 1 2021 and together with the revisions to the Investment Limited Partnership Act and the proposed specialised depositary regime, should provide private equity, venture capital, private debt and real estate managers with a best-in-class tax transparent structure for their strategies.

Regulatory Spotlight on Costs and Performance and use of EPM techniques in UCITS funds

ESMA published a supervisory briefing on the supervision of costs in UCITS and AIF funds to all national competent authorities in June 2020. In that supervisory briefing, ESMA provided guidance to national competent authorities on the notion of “undue costs” which it noted had been interpreted differently across the EU. It also provided guidance on how to supervise UCITS management companies and AIFM to ensure that end investors are not subject to any such “undue costs”. ESMA noted in the accompanying press release that the supervisory briefing was intended to reduce the risk of regulatory arbitrage and to ensure equal levels of investor protection throughout the EU and that it intended to assess the level of convergence across the EU in 2021.

In a press release published in January 2021, ESMA has confirmed that it is launching a common supervisory action (“CSA”) with E.U. national competent authorities on the supervision of costs and fees of UCITS during 2021 in order to assess the compliance of UCITS management companies with (i) the relevant cost-related provisions in the UCITS framework and (ii) the obligation of not charging investors with undue costs and to ensure greater convergence in the supervision of costs.

ESMA has noted that it will have regard to the supervisory briefing which it published in June 2020 in conducting the CSA. We can therefore expect a regulatory spotlight on the pricing processes adopted by fund management companies which should provide for clear identification and quantification of all costs which will be charged to the relevant fund.

ESMA has advised that the CSA will also cover entities using EPM techniques to assess whether they adhere to the requirements set out in the UCITS framework and the ESMA Guidelines on ETFS and other UCITS issues.

Leverage under AIFMD

In December 2020, ESMA published its finalised guidelines on leverage under AIFMD which will come into force in the course of 202126. Addressed to national competent authorities rather than directly to AIFMs, the purpose of the guidelines is to ensure that adopt a consistent approach when assessing whether the condition for imposing leverage-related measures (such as the imposition of leverage limits under Article 25 of AIFMD) are met.

ESMA provides national competent authorities with guidance on conducting an assessment of leverage-related systemic risk and guidance to be followed when deciding whether or not to impose leverage limits on an AIFM in respect of one or more AIFS under management. It confirms that leverage limits should be based on the leverage measures set out in AIFMD27.

2021 may therefore see the Central Bank of Ireland or other national competent authorities exercising its powers under Article 25 to impose leverage limits on AIFMs regulated by it where it believes that to do so is necessary to protect the stability and integrity of the financial system.

Liquidity Management

The regulatory spotlight on how management companies manage liquidity risk has perhaps unsurprisingly only intensified since the onset of COVID-19 with market conditions creating significant liquidity difficulties for certain corporate bond funds and real estate funds in particular. Following on from a report issued by ESMA in November 2020 which is discussed in greater detail in our client briefing on the topic, fund management companies can expect increased supervision from the Central Bank in the course of 2021 on the alignment of the investment strategy of funds under management with their liquidity profile and redemption policies as well as a focus on the manner in which they assess liquidity risk. In its report, ESMA also reiterated its call for enhanced liquidity risk reporting to be applied to UCITS management companies as well as for a harmonised legal framework governing the use of liquidity management tools in both the UCITS and AIFM frameworks as part of the current review of AIFMD being conducted by the European Commission. It also noted in its work programme for 2021 that it intends to “foster convergence in the areas of liquidity risks in funds and the use of liquidity management tools by funds”.

Therefore it would seem certain that liquidity risk management will remain a key theme for fund management companies over the next 12 months.

Benchmark Reform/Third Country Benchmarks

The last months of 2020 saw a number of developments in global benchmark reforms which should be monitored carefully by fund management companies in the course of 2021 to ensure that the use of benchmarks by funds under management complies with all applicable regulation.

(i) Phase out of LIBOR

As readers will be aware, the FCA had previously advised market participants that they could not rely on LIBOR being published after the end of 2021 and so should implement transition plans to ensure that all exposure to LIBOR was eliminated before that date.

However, in December 2020, the administrator of the LIBOR benchmarks has issued a consultation on potential cessation of LIBOR benchmarks. In it, it proposed that LIBOR benchmarks denominated in GBP, EUR, CHF and JPY in all tenors, as well as the 1 month/2 month USD LIBOR settings would cease to be published after 31 December 2021. However, it has also proposed that the remaining USD LIBOR (including overnight and 1, 3, 6 and 12 month rates) would continue to be calculated until June 2023 which would allow most legacy USD LIBOR contracts to mature before the relevant LIBOR rate ceases to be calculated. This consultation closes on 25 January 2021.

UCITS management companies and AIFMs should monitor developments, bearing in mind that the FCA has confirmed that it encourages market participants which are party to legacy LIBOR contracts to continue work to convert these contracts or adopt robust fallbacks and to transition away from LIBOR, noting that this is “the only way for parties to have certainty and control over their contractual terms when LIBOR ceases or is no longer representative”.

(ii) Third Country Benchmarks

To date, EU management companies have been permitted to use benchmarks administered in a country outside the Union for the purposes set down in the Benchmarks Regulation28.

Under the current text of the Benchmarks Regulation, EU management companies can no longer use third country benchmarks (including those administered by UK administrators or benchmarks previously endorsed or recognised in the UK) for the purposes set down in the Benchmarks Regulation after 31 December 2021 without (i) an equivalence decision from the European Commission in respect of specific third country administrators or benchmarks or (ii) the relevant benchmark administrator being recognised or endorsed by an EU competent authority under the third country benchmark regime and appearing on the relevant ESMA register.

However, following significant pressure from industry participants to extend the transitional period beyond 31 December 2021, the European Commission has published a proposed amendment to the Benchmarks Regulation which would allow EU management companies to continue to use third country benchmarks for the purposes set down in Benchmarks Regulation until 31 December 2023 without the benchmark administrator/benchmark complying with the third country regime under the Benchmarks Regulation, with the possibility of a further extension until 31 December 2025, where the European Commission is satisfied that such extension is required.

(iii) Phase out of EONIA and the need for fall-back provisions in EURIBOR contracts

On 3 January 2022, EONIA will be discontinued and will be replaced by €STR. ESMA has called on all market participants to “actively use €ESTR instead of EONIA in all their new contracts, as well as in their internal systems and calculations”. Separately, although ESMA has confirmed that the authorisation of EURIBOR pursuant to the Benchmarks Regulation will allow EU management companies to continue using EURIBOR for the foreseeable future and that there “is no EURIBOR discontinuation in sight”, it has emphasised the importance of introducing fallbacks in EURIBOR contracts which should work to ensure the continuity of contracts in the unlikely scenario of its discontinuation.

Data Protection

The transfer of personal data to third countries will likely to be an area of data protection focus for fund management companies in 2021.

Early in 2021, the European Commission is expected to publish new “Third Country SCCs” which will replace the existing standard contractual clauses used by many fund management companies to legitimise the transfers of personal data outside of the EEA. The Third Country SCCs have been revised in line with GDPR requirements and to address some of the main issues identified in the Schrems II judgement. In certain circumstances, the Third Country SCC may need to be used along with the EDPB Recommendations on Supplementary Measures for Transfer Tools. It is currently expected that organisations which have already entered into standard contractual clauses under the old regime to legitimise the transfer of personal data outside of the EEA will have 12 months within which to replace these contractual provisions with the new Third Country SCC.

As noted in our recent client briefing, under the EU-UK Trade and Cooperation Agreement, fund management companies can continue to transfer personal data to the United Kingdom without having to put in place any additional safeguards until 30 June 2021 at the latest. While it is hoped that the European Commission will announce an adequacy decision in favour of the United Kingdom’s data protection regime in the interim period, fund management companies will need to monitor this carefully.

PRIIPs Reform

UCITS funds which are marketed to retail investors are not currently required to prepare a PRIIP KIID under the PRIIPs Regulation. This exemption is due to expire on 31 December 2021. The European Commission must therefore, as part of its ongoing review of the PRIIP regime, decide in the course of 2021 whether UCITS should be required to prepare a PRIIPS KID in addition to a UCITS KIID from 1 January 2022, whether the current exemption for UCITS should be further extended or whether UCITS KIID should be further replaced by29, or considered equivalent to, the PRIIPs KIID.

Industry has called for the current UCITS exemption to be extended until a full review of the PRIIPs Level 1 and Level 2 measures has been completed30. Furthermore, in a speech delivered in October 2020, ESMA’s Steven Maijoor advised that ESMA is of the view that UCITS should fall outside of the scope of the PRIIPs Regulation if the latter is not revised to introduce an obligation to disclose past performance information to investors.

Given the lack of clarity and the far-reaching consequences of any decision by the European Commission on the application of the PRIIPs Regulation to UCITS funds, UCITS management companies should monitor developments in this space carefully over the course of 2021.

AIFMs which must already publish a PRIIPS KID as a result of AIFs under management being marketed to EU retail investors should also track developments on the PRIIP reform.

Developments impacting Exchange Traded Funds

Transitioning away from CREST

With effect from 30 June 2021, Irish domiciled ETF will no longer be able to rely on the CREST securities settlement system for the settlement of their shares as it is operated by Euroclear UK and Ireland which is a UK regulated central securities depositary as ESMA’s temporary third-country recognition of Euroclear UK and Ireland will expire. Irish domiciled ETF should ensure that they have transitioned from the CREST settlement system to an alternative international CSD model by that date.

IOSCO Questionnaire on Exchange Traded Funds

Managers of ETF may wish to respond to the questionnaire published by IOSCO for industry participants on exchange traded funds, responses for which must be submitted by 1 March 2021. IOSCO has issued the questionnaire in order to enhance its understanding of certain topics relating to ETFs including issues which arose during the market volatility in March/April 2020. It has noted that it will take the responses to the questionnaire that it receives into account when formulating any potential guidance with respect to ETFS in the future.

Central Bank Consultation on Non-Transparent ETF

2021 may also see the Central Bank issuing a consultation on non-transparent ETF in the course of 2021 which is likely to be closely followed by those ETF managers considering launching actively-managed ETF in the medium-term.

Investment Firms Framework

As readers may be aware, many of the provisions of a new prudential framework for EU investment firms which comprises of an Investment Firms Directive and an Investment Firms Regulation, will enter into force on 26 June 2021. The new regime is designed to make the rules applicable to investment firms more proportionate and more appropriate to the level of risk which they take, with the requirements imposed on them varying depending on their nature, size and complexity. The first half of 2021 will likely see in-scope firms implementing compliance plans to identify and address changes resulting from their classification under the new regime which may impact regulatory capital requirements, liquidity arrangements, disclosure and regulatory reporting requirements, internal governance and remuneration requirements amongst other requirements in advance of the 26 June deadline.

The revised third country framework for the provision of investment services within the EU by third country firms will also apply from that date.

Anti-money laundering and counter-terrorist financing

In early 2021, Ireland’s anti-money laundering and terrorist financing regime will be further amended in order to transpose criminal justice elements of the Fifth EU Anti-Money Laundering Directive into Irish law. The revisions to the existing framework seek to improve safeguards for financial transactions to and from high-risk third countries, enhance existing customer due diligence requirements, broaden the definition of a politically exposed person and to improve the transparency of beneficial ownership of legal entities.

Senior Executive Accountability Regime

In its Programme for Government published in June 2020, the current Government confirmed its intention to introduce a Senior Executive Accountability Regime (or “SEAR”), to improve individual accountability in the financial services sector. This followed on from a commitment made by the previous Government in June 2019, to implement the Central Bank’s proposals on an Individual Accountability Framework (the “IAF”), which had been proposed by the Central Bank in its report on Behaviour and Culture of the Irish Retail Banks” in July 2018 (the “Culture Report”). The IAF envisaged in the Culture Report covers not only the establishment of a SEAR regime but also the introduction of Conduct Standards for individuals, enhancements to the fitness and probity regime and a unified enforcement process. While the Culture Report suggested that SEAR might initially be applied to a sub-set of regulated entities only (including credit institutions, insurance companies and investment firms), potentially being expanded at a later stage to cover other types of regulated entities, it is likely that the other aspects of the IAF will be applied to all regulated entities from the outset.


1 References to “management companies” or “fund management companies” in this briefing include UCITS management companies, AIFMs, self-managed UCITS funds and internally managed AIF funds unless otherwise indicated.

2 This briefing 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 briefing. In addition, it does not address other matters where a set date for compliance has not been applied, including for example (i) the obligation imposed on fund management companies which have chosen to implement a shareholder engagement policy under SRD II to provide shareholders with information on their website on how that policy has been implemented in the previous 12 months or (ii) the obligation imposed on Irish UCITS management companies (and Irish UCITS SMIC) by the Central Bank to carry out a viability and suitability assessment of each Irish-domiciled UCITS under management when assessing the investment manager’s annual presentation. Irish domiciled managers of MMFs will also be required to report certain prescribed information to the Central Bank of Ireland in accordance with Article 37 of the MMFR on a periodic basis during the course of 2021.

3 In each case, the dates for filing of returns with the Central Bank are estimated only and may vary from firm to firm. Clients should therefore refer to the firm’s ONR for specific filing date imposed by the Central Bank for each return.

4 The new rules do not apply to closed-ended retail AIFS or open-ended retail AIFS which are EuVECAs, venture capital AIFs, EuSEFs, private equity AIFs or real estate AIFs.

5 The Central Bank has set out its proposed Performance Fee Guidance in Schedule A to its Consultation Paper 134 which is available here

6 For an analysis on ESMA’s recommendations to the European Commission, please refer to our client briefing on the topic.

7 In each case, the dates for filing of returns with the Central Bank are estimated only and may vary from firm to firm. Clients should therefore refer to the firm’s ONR for specific filing date imposed by the Central Bank for each return.

8 The Central Bank had issued an earlier Dear Chair letter on the topic of Fitness and Probity in April 2019

9 In each case, the dates for filing of returns with the Central Bank are estimated only and may vary from firm to firm. Clients should therefore refer to the firm’s ONR for specific filing date imposed by the Central Bank for each return.

10 Please refer to the firm’s ONR for specific filing date imposed by the Central Bank for each return as this may vary from firm to firm.

11 Please refer to the firm’s ONR for specific filing date imposed by the Central Bank for each return as this may vary from firm to firm

12 Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019

13 ESG funds comprise of funds which fall within Article 8 of the SFDR (which is any fund which promotes, amongst other characteristics, environmental or social characteristics (or a combination of such characteristics) and the companies in which the fund invests follow good governance practices) or Article 9 of the SFDR (which is any fund which has sustainable investment as its objective or has reduction in carbon emissions as its objective).

14 While we can expect the publication of the ESA’s finalised draft Level 2 measures under the SFDR by end of January 2021, their entry into force has been delayed to a “later stage”. As a result, the European Commission has advised that disclosures made under relevant provisions of the SFDR (being Article 4, Article 8 and Article 9) which must be made by 10 March 2021 should be “high-level and principals based”.

15 Fund management companies refers to Irish-regulated UCITS management companies, AIFMS, self-managed UCITS and internally managed AIF.

16 The Central Bank has set out its proposed Performance Fee Guidance in Schedule A to its Consultation Paper 134 which is available here

17 The new rules do not apply to closed-ended retail AIFS or open-ended retail AIFS which are EuVECAs, venture capital AIFs, EuSEFs, private equity AIFs or real estate AIFs.

18 By way of example only, an existing UCITS fund which is subject to a performance fee and which has an accounting period which begins on 1 January in each year must comply with the Performance Fee Guidance from 1 January 2022 (being the first accounting period of the fund beginning after 5 July 2021).

19 Directive (EU) 2019/1160

20 Regulation (EU) 2019/1156

21 In its draft guidelines, ESMA makes clear that all marketing communications advertising a UCITS or AIF fall within the scope of the new rules, including for example webpages, video presentations, live presentations, radio messages or factsheets, and any messages broadcast on a social media platform.

22 The Cross Border Distribution Directive makes clear that where a professional investor in a Member State subscribes for units or shares in a pre-marketed AIF within 18 months of the AIFM starting to pre-market that AIF, this will automatically be considered to be as a result of marketing and consequently the AIFM will be subject to the notification procedures under Article 31 or Article 32 of AIFMD. In effect, this means that there is a restriction from relying on reverse solicitation for 18 months after the AIFM engages in pre-marketing of the relevant AIF, thus making it more difficult to rely on reverse solicitation.

23 The applicable provisions of the Taxonomy Regulation which apply from 1 January 2022 include funds which either (i) invest in an economic activity that contributes to climate change adaptation or climate change mitigation or (ii) which promote environmental characteristics relating to climate change adaption or climate change mitigation

24 Subject to any clarification being issued by the European Commission or the ESAs, we understand that these reporting obligations will apply in respect of any accounting period beginning on or after 1 January 2022.

25 As expected, it has confirmed that the directors of a general partner will be deemed to be performing Pre-Approval Controlled Functions within the meaning of Ireland’s financial sector’s fitness and probity rules and will be required to comply with the Central Bank’s guidelines in that regard

26 The Guidelines will apply two months after the date on which they are published in the official languages of the EU on ESMA’s website

27 These measures comprise of the gross method as set out in Article 7 of the AIFMD Delegated Regulation and the commitment method as set out in Article 8 of the AIFMD Delegated Regulation

28 Regulation (EU) 2016/1011

29 This would require legislative amendments to the UCITS legislative framework to “turn off” the obligation to prepare a UCITS KIID in circumstances where a PRIIPS KID has been published.

30 EFAMA and Better Finance both call for an extension of the UCITS exemption until such time as a full review of the PRIIPS regime has been completed.

DISCLAIMER: This document is for information purposes only and does not purport to represent legal advice. If you have any queries or would like further information relating to any of the above matters, please refer to the contacts above or your usual contact in Dillon Eustace.

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