The Irish Stock Exchange ("ISE") has introduced a new Listing Rule 7.54 regarding a funds ability to hold cash with a credit institution  and a new Listing Rule 2.69 with respect to legal and management control to a funds investment in other investment funds. The additional new rules are effective from 12 June 2012.
New Listing Rule 7.54
Listing Rule 2.52 states that no more than 20% of the value of the gross assets of a fund may be:
(a) "Lent to or invested in the securities of any one issuer (including the issuer's subsidiaries or affiliates)"; or
(b) "Exposed to the creditworthiness or solvency of any one counterparty (including that counterparty's subsidiaries and affiliates)".
The new Listing Rule 7.54(a) provides that this no longer applies to a funds cash held on deposit with a credit institution provided where the fund deposits cash with a credit institution for its own account, the fund will confirm the following:
- The directors of the fund believe that the placing of cash on deposit with the credit institution is in the best interests of the shareholders of the fund and is in line with the investment policy of the fund.
- The fund will appoint an independent administrator or other independent entity responsible for carrying out a periodic reconciliation of the funds cash position at the credit institution. The reconciliation should consist of a reconciliation of the funds cash position at the credit institution to the books and records of the independent administrator or other independent entity based upon receipt of statements of information from the credit institution. Such reconciliation should take place in connection with each dealing day and not less than quarterly. The entity may maintain independence in one of the following ways: (a) the entity is not an affiliate of the fund, (b) the entity is a separate yet affiliated legal entity to the fund that achieves functional independence through the separation of legal entity management and the adoption of entity specific controls and procedures; and
- The placing of cash deposits with a credit institution outside of the funds custody - prime broker network is restricted to funds that confine investment to professional investors.
Where the amount of cash held on deposit with a credit institution is greater than 20% of the funds gross assets Listing Rule 7.54(b) will also apply.
Listing Rule 7.54(b) states that the credit institution must satisfy:
- the Specified Credit Rating and Financial Resources Requirement as defined by the ISE; and
- be regulated as a credit institution by a Recognised Regulatory Authority.
It must be noted that Listing Rule 7.54 will not impact funds regulated by the Central Bank of Ireland. The listing particulars should also disclose any material risks associated with placing cash outside of a fund's custodial network.
Listing Rule 7.54(a) will only apply where the account is not held in the name of the custodian.
New Listing Rule 2.69
New Listing Rule 2.69 provides that Listing Rule 2.53, whereby a fund may not take or seek to take legal or management control of the issuer of any of its underlying investments, will not apply to a fund's investment in other open-ended funds.
For further information please speak to your usual contact or the individuals listed above.
 The term "credit institution" shall have the same meaning as defined in Directive 2006/48/EC. ("Credit institution" means: (a) an undertaking whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account; or (b) an electronic money institution within the meaning of Directive 2000/46/EC (1);)