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Industry Updates

Central Bank Issues New Rules for Fund Boards

03 Sep 2015

The Central Bank of Ireland ("Central Bank") has issued a paper on Fund Management Company Boards (the "Paper") available here.

The Paper covers:

  • A feedback statement on the Central Bank's consultation on fund management company effectiveness that issued, in the form of Consultation Paper 86 ("CP86") in September 2014;
  • New guidance on organisational effectiveness and key management functions;
  • New draft guidance on delegate oversight; and
  • New guidance on directors’ time commitments.

This update highlights some headline items in the Paper.

Organisational Effectiveness and Key Management Functions

The Paper confirms the revision of the existing 10/16 key management functions applicable to UCITS management companies/AIFMs respectively. Accordingly, for both UCITS management companies and AIFMs, there are now six key management functions to be discharged, as follows:

  1. Investment management;
  2. Fund risk management;
  3. Regulatory compliance;
  4. Distribution;
  5. Capital and financial management; and
  6. Operationalrisk management.

Investment management and fund risk management functions cannot be performed by the same designated person.

Operational risk management is a new function, not contained in the initial set of proposed functions in CP86.

In addition, an organisational effectiveness role, separate to these key management functions, must be discharged by one of the independent directors. This role involves ongoing monitoring of the way the company is organised (including considering board composition). The relevant director will be required to submit observations and reports to the board for "discussion and decision". The director fulfilling this role may not also fulfil any of the six key management functions.

Some other points to note:

  • The Paper confirms there may only be one designated person per key management function "for reasons of clear accountability"; and 
  • Persons fulfilling designated person functions should receive separate letters of appointment covering remuneration receivable and time commitment for that specific role. This would mean a second, separate letter of appointment for a person also acting as a director.

Transition period

A further consultation will follow in order to finalise additional guidance on the role of the designated persons, details of the revised managerial functions and the organisational effectiveness role. This additional guidance should be in place by the end of 2015.

Existing fund management companies must update their business plans/programmes of operation to reflect the revised managerial functions and the organisational effectiveness role by 30 June 2016.

Delegate Oversight Guidance

The Central Bank has outlined a range of proposed measures aimed at ensuring that external delegation by a fund management company does not undermine its retention and exercise of overall control. This guidance reflects the committee report included in CP86, adapted as regulatory guidance.

A list of key reserved responsibilities is outlined. Also, requirements are set out for a range of reports to be received from delegates in relation to (i) investment management; (ii) distribution; and (iii) risk management (both investment risk and operational risk). 

There is also a requirement for fund management companies to report on specific matters to corporate fund boards that appoint them.


This new proposed guidance is open to comment as a new consultation, closing on 24 July 2015.

Directors’ Time Commitment Guidance

Some headline points to note regarding the Central Bank’s new requirements on time commitments for directors:

  • Minimum time allocation for board meetings to be documented in directors’ letter of appointment (with extra time expected for the chair);
  • Separate time commitment allocation for each designated person function, reflected in the separate designated person letter of appointment;
  • Time commitment to reflect the number of sub-funds; and
  • Membership of board committees to be regarded as separate roles in assessing time commitment.

Too many directorships – "risk indicator" deterrents  

The guidance categorises directors that trigger a "risk indicator" with the Central Bank.

This relates to directors with high levels of directorships, combined with high aggregate levels of annual professional time commitments. The Paper refers to 20+ directorships and 2000+ hours of commitments, but it would seem the exact details are to be considered on a case-by-case basis.

Boards with "risk indicator" directors will not be able to avail of the QIAIF 24 hour authorisation process, as additional time will be required for the Central Bank’s "additional enquiries" to be considered.

From 1 January 2016, boards with "risk indicator" directors "will be given priority consideration for inclusion in Central Bank thematic reviews where board effectiveness is being tested in any respect".


This section of guidance is now effective. The Central Bank will be writing to boards that have "risk indicator" directors regarding the time commitment of such directors. As noted above, thematic review priority will apply to such boards from 1 January 2016.

Further Information

For further information on the Paper, please contact your usual Maples and Calder contact.

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