Having commenced in September 2014, the Central Bank of Ireland (the "CBI") has now finalised its CP86  project.The objective of CP86 was to introduce initiatives "designed to underpin the achievement of substantive control by fund management companies, acting on behalf of investment funds, over the activities of their delegates." The new measures apply to Irish authorised fund management companies (capturing UCITS management companies, AIFMs, self-managed UCITS and internally managed AIFs).
This update outlines the new measures and considers the implications for existing fund management companies that will need to comply with the new rules and guidance on governance, delegate oversight and other operational matters.
The process concluded with the publication by the CBI in December 2016 of a:
- feedback statement (the "Feedback Statement") on the third consultation of CP86; and
- a paper entitled Fund Management Companies – Guidance (the "CP86 Guidance Paper").
Feedback StatementThe third consultation was a public consultation issued on 2 June 2016 on the key management functions and operational issues. The Feedback Statement summarises the CBI's final position on the rule on location of directors and designated persons (see below on the EEA location rules) and gives feedback on the responses received from the consultation.
CP86 Guidance Paper
The CP86 Guidance Paper consolidates all of the new areas of guidance for fund boards developed over the course of the CP86 project. The guidance is set out in six parts, as summarised in Appendix I per the attached.
EEA location rules relaxed but retained
The CBI shifted slightly, but not significantly, on its EEA location requirements, as proposed in the third consultation. Most fund management companies (as low impact firms) will be required to have:
- at least half of the directors located in the EEA; and
- at least half of the managerial functions performed by at least two designated persons resident in the EEA.
Fund management companies that have a medium low PRISM rating (or higher) will also be required to have a third Irish resident director or at least one designated person resident in Ireland.
This represents a reduction of the threshold level to be located in the EEA from two-thirds (as proposed in the third consultation) to half in the relevant cases; and the requirement for at least two EEA resident designated persons.
Designated persons in the same group
The CBI heeded industry feedback on the matter of designated persons employed by the same group (the "co-location rule"). The requirement (contained in the draft guidance in the third consultation) that designated persons should be employed by the same group of companies was removed from the final guidance. This will facilitate the appointment, for example, of external providers for certain designated functions with other designated functions retained internally by the fund management company's group.
Transition and timing
The majority of elements of the CP86 Guidance Paper have been in effect since earlier in the process or are now effective.
However, existing fund management companies have until 1 July 2018 to comply with certain new rules. ID1053 in the latest edition of the CBI's UCITS Q&A, and ID1113 in the latest edition of the CBI's AIFMD Q&A, set out the various effective dates for the new measures as they apply to both new and existing fund management companies.
Key steps all existing fund management companies will need to take include the following:
- Adjusting to six key managerial functions and assigning/re-assigning key managerial functions to appropriate designated directors/designated persons and updating business plans/programmes of activity to reflect new framework of six key managerial functions;
- Adjusting board composition/identity of designated persons, as appropriate, to comply with the new EEA location rules;Appointing an individual to fulfil the organisational effectiveness role; and
- Making arrangements to comply with the retrievability of records requirements including maintaining a designated email address.
Should you have any questions or would like to discuss the above, please contact your usual Maples and Calder contact.
 Consultation on Fund Management Company Effectiveness – Delegate Oversight Consultation Paper ("CP86")