Central Bank Of Ireland Publishes Feedback On AIFMD Consultation

Author:Mr Carl O'Sullivan, Sarah Cunniff, Kevin Murphy and Dara Harrington
Profession:Arthur Cox

On 30 October 2012 the Central Bank of Ireland (the Central Bank) published Consultation Paper CP60 "Consultation on implementation of Alternative Investment Fund Managers Directive". Our previous bulletin which describes the original consultation paper was circulated on 2 November 2012 and can be found here. On 1 February 2013 the Central Bank issued a feedback statement on CP60 as well as a revised draft of its new AIF Handbook. The Central Bank's feedback on the key issues raised in CP60 are set out below, as well as an analysis of the related changes to the AIF Handbook.

Abolition of promoter requirement

The Central Bank has confirmed that it will dispense with the requirement that alternative investment funds (AIFs) have an approved promoter. The Central Bank acknowledges that the obligations on the alternative investment fund manager (AIFM) set out in the Alternative Investment Fund Managers Directive (AIFMD) would be duplicative and the investor protections in AIFMD are sufficient so as not to require it to impose any additional requirements. However, the Central Bank has insisted on including related new provisions in the AIF Handbook clarifying the obligations of directors when an AIF gets into difficulties. Respondents to CP60 had argued that articulating such standards might amount to prejudging specific situations. The Central Bank believes that it can articulate good standards in this way without pre-judging any particular situation and it will always be open to assessing the particular circumstances affecting an investment fund and its directors. It also believes that this text is important as it puts all directors on notice that the Central Bank views the actions of a director of an AIF in difficulties as matters which can be taken into account when making any future assessments of the fitness and probity of that director.

Master-feeder structures

The Central Bank has decided to continue the general prohibition on investment by a qualifying investor AIF (QIAIF) of more than 50% of nets assets in a single unregulated fund but has provided greater flexibility in terms of the circumstances in which this will not apply. The approach of applying a 50% threshold was criticised on the basis that it was not consistent with the master/feeder provisions of the AIFMD (which apply an 85% threshold).

A QIAIF will be able to invest in excess of 50% in a single unregulated fund where it has a minimum subscription limit of €500,000 and where its prospectus contains a detailed and prominent disclosure which identifies on an item-by-item basis those obligations and conditions which apply to the QIAIF and its AIFM but which do not apply to the underlying unregulated investment fund and its manager. Previously, the criteria which had to be fulfilled to avail of this derogation were more extensive and included requirements relating to the capitalisation...

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