The Central Bank has published guidance on "Umbrella funds - cash accounts" which applies to the holding of cash assets of UCITS or AIF umbrella funds in a single account at the level of an umbrella fund (an "umbrella cash collection account") in the name of the investment fund, the fund management company on behalf of the investment fund or the depositary (the "Guidance").
The publication of the Guidance follows the introduction of the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) Investor Money Regulations 2015 (the "Investor Money Regulations") in March 2015. The Investor Money Regulations apply to investor money collection accounts held by fund service providers from 1 April 2016. Following the introduction of the Investor Money Regulations, the current models employed for holding subscription and redemption monies, including where these are not held in fund service provider collection accounts or where they are held as fund assets, were considered by industry. The Guidance is intended to provide clarity on the principles applicable to one such model, namely umbrella cash accounts containing subscription, redemption or dividend money received from or due to investors in the sub-funds of an umbrella fund, where the sub-funds operate on a contractual settlement basis. Use of an umbrella cash account, where appropriate, will avoid the need for separate collection accounts at a sub-fund level.
At a December 2015 industry seminar discussing the Guidance, Ms Martina Kelly, Deputy Head, Markets Policy Division at the Central Bank, commented that the Guidance is intended to provide clarity in relation to the existing practice of operating collection accounts at umbrella fund level, and that there has been no change in law in relation to the matters addressed in the Guidance. Ms Kelly indicated that there will be no Central Bank approved models for collection accounts, whether falling under the Investor Money Regulations or held as fund assets, but that the various models across the industry should be reviewed for compliance with the Investor Money Regulations or the Guidance, where relevant.
What does the Guidance say?
The Guidance states that constitutional documents for umbrella funds must provide that assets and liabilities of each individual sub-fund are kept separate from all other sub-funds and that separate books and records are maintained for each sub-fund in which all transactions relevant to the sub-fund are...