Since 1995, the Central Bank has applied "minimum activity" rules to Irish domiciled investment funds. Pursuant to these regulatory requirements, it has been mandatory for core fund administration activities (such as the calculation of net asset value, the preparation of annual and semi-annual accounts, the keeping of fund books and records and the shareholders' register) to be performed in Ireland.
Having carried out a review of the existing rules, in late 2010 the Central Bank launched a consultation to consider the proposed removal of the minimum activities regime for UCITS and non-UCITS. To coincide with this, it is intended to introduce new requirements governing the outsourcing of services by Irish regulated administrators.
Removal of Minimum Activities Regime
The stimulus for the review and proposed removal of the minimum activities regime has been two-fold: first, with the impending implementation of management company passport pursuant to the UCITS IV Directive, the location of a UCITS will soon no longer be linked to the locus of the operations of that UCITS. Therefore, the Central Bank will not have responsibility for the supervision of activities of a non-Irish management company, including the administration functions. As a corollary to this, the Central Bank will not impose minimum activities relating to an Irish UCITS to be adhered to by an Irish resident entity. Second, developments which have occurred within the fund administration industry have been taken into consideration, for example fund accounting systems that operate on a global basis across group companies, which make it possible for specific activities to be carried out in another country whilst the Irish administrator retains control of these systems and processes. For consistency, the proposals seek to remove the minimum activities requirements for both UCITS and non-UCITS funds.
In terms of the introduction of a regulatory framework to govern the outsourcing of fund administration services, the component parts of the proposed new system are set out CP 38, the Central Bank's consultation paper. Within the consultation, the Central Bank also raised 36 specific questions for consideration by respondents and interested stakeholders from all parts of the industry. The consultation noted the intention that the proposed new requirements incorporate and are consistent with both the rules on outsourcing contained in MiFID and the Committee of...