The Central Bank of Ireland (the "Central Bank") has recently clarified a number of key points to the Irish funds industry which will be relevant to market participants impacted by Brexit. The purpose of this article is to highlight the most pertinent developments in this regard.
Delegation by Irish fund management companies to UK firms of the investment management of Irish funds post Brexit
Regulation 21(1)(d) of Ireland's EU (Alternative Investment Fund Managers) Regulations, 2013, as amended ("AIFMD Regulations") requires that an Irish authorised AIFM or internally managed AIF cannot delegate portfolio management or risk management to a third country firm unless, inter alia, "co-operation between the [Central] Bank and the supervisory authority of the undertaking shall be ensured".
Similarly, Regulation 23(1)(d) of Ireland's European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2011, as amended ("UCITS Regulations"), requires that an Irish UCITS management company or self-managed UCITS cannot delegate investment management to a third country firm unless, inter alia, "co-operation between the [Central] Bank and the supervisory authorities of the third country concerned is ensured".
As readers will be aware from our recent publication, the ESMA Multilateral Memorandum of Understanding (ESMA MoU) with the FCA was announced by ESMA on 1 February, 2019. The ESMA MoU satisfies both of the requirements noted above in relation to delegation under the UCITS Regulations and AIFMD Regulations.
UK AIFMs acting as AIFMs to Irish AIFs post Brexit
In the event of a hard Brexit, UK AIFMs of Irish AIFs will become third country AIFMs for Irish regulatory purposes. The Central Bank of Ireland has confirmed in its AIFMD Q&A (ID 1129) that:
An Irish AIF can retain or appoint UK AIFMs post Brexit; and The Irish QIAIF and the UK AIFM must comply with the provisions of the AIF Rulebook that apply in the case of QIAIFs with registered AIFMs. These requirements, which are largely taken from organisational and conduct of business requirements of the AIFMD Regulations, are set out in Part III of Chapter 2 of the Central Bank's AIF Rulebook. Procedurally, the Central Bank has requested Irish AIFs that wish to retain UK AIFMs post 29 March, 2019 to notify the Central Bank by email by 22 February, 2019. Likewise, UK AIFMs must notify the Central Bank of their intention to continue to act as a non-EU AIFM by the same...