Irish Central Bank Opens Its Door for AIFMD Business

by Dechert LLP

The Central Bank of Ireland (Central Bank) is now accepting applications for authorisation under the Alternative Investment Fund Managers Directive (AIFMD) on an informal basis. Applications can be made on the Central Bank’s Application Forms which, with the exception of the forms governing the Depositary and Distributors/Paying Agents/Representative Agents, are broadly similar to existing application forms for QIFs (now Qualifying Investor Alternative Investment Funds or QIAIFs). The Central Bank has also published a Questions and Answers document on AIFMD implementation.

It is hoped that these informal applications will have reached “no comment” stage by the time the Central Bank is able to formally issue authorisations under AIFMD on 22 July 2013.

The Central Bank will continue to operate a 24 hour approval process for QIAIFs.

Those managers wishing to be first to the AIFMD market should consider submitting their application at the earliest possible date.

The Central Bank will accept applications for the establishment of new umbrella QIAIFs under the old regime until 20 July 2013.

NU Notices Become the AIF Rulebook

The Central Bank has introduced a new AIF Rulebook which largely replaces the old Non-UCITS Notices and also replaces the draft AIF Handbook issued by the Central Bank in February. The AIF Rulebook sets out the conditions which will be applied to an AIF or AIFM, when authorised. The AIF Rulebook, which will be an organic document, does not include legislative requirements which apply directly or guidance, as previously provided by Central Bank Guidance Notes. In the future, such guidance will be provided in a “Markets Update” issued by the Central Bank and, in the interim, the AIF Handbook can be used to “inform your approach”.

Transitional Arrangements

During the transitional period to 22 July 2014, the Central Bank:

  •  will not be prescriptive in requiring compliance on a “best efforts” basis
  • advises AIFMs “to pay particular attention to ensuring that their planning towards compliance takes account of the complex compliance challenges they particularly face in achieving best efforts”
  •  will permit existing umbrella QIAIFs to establish new sub-funds under the “Old” Non-UCITS Notices
  •  will apply the “New” AIF Rulebook to QIAIFs once their AIFM is authorised
  •  will permit unauthorised AIFMs to establish new QIAIFs
  • will permit EU AIFMs to manage/market QIAIFs without a passport if the AIFM member state allows
  • will permit non-EU investment managers to continue to provide services to QIAIFs
  •  will permit non-EU investment managers to act as AIFMs for QIAIFs without requiring full AIFMD compliance for at least 2 years
  • will not require AIFMs to provide notice of an intention to rely on the transitional arrangements
  • will not require co-operation arrangements to be in place with non-EU investment management delegate countries
  • will only apply the new AIFMD depositary arrangements from the earlier of the authorisation of AIFM or 22 July 2014

Depositaries: Delegation of Functions and Contractual Discharge of Liability

Under the AIFMD, a depositary is permitted to delegate its functions and to contractually discharge its liability to a delegate provided there are objective reasons for doing so. The Central Bank has indicated that the bar will be set quite high with regard to the justification for contractual discharge, that it be kept under review, documented and approved at a senior managerial level within the depositary. The Central Bank has clarified that it will not review arrangements relating to discharge of liability, but will take action if it considers depositaries to be disregarding their duty to comply with the AIFMD.

Depositary Lite

If an Irish entity would like to provide safekeeping or oversight functions as described in Article 36 of the AIFMD (so called “depositary lite” services), the Central Bank has clarified that this activity is not regulated under the AIFMD. However, the Irish entity should determine if it requires separate authorisation under the Investment Intermediaries Act of 1995 to carry out these functions.

Delegation of Portfolio or Risk Management

In relation to delegation of portfolio or risk management functions, the Central Bank has clarified that while certain portfolio and risk management tasks may be delegated, they cannot include tasks which are required to be exercised by the board or its designated persons. For each proposed arrangement, the Central Bank will review the extent of delegation of portfolio and risk management tasks.

AIFs in Liquidation

For AIFs in liquidation, the Central Bank will not require an AIFM to be authorised under AIFMD provided the AIF has begun the liquidation process before 22 July 2014.

Please click here for links to the documents discussed in this update. 

Written by:

Dechert LLP

Dechert LLP on:

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