UCITS Update

Author:Mr Barry McGrath, Peter Stapleton, Stephen Carty, Paul Dobbyn, Elaine Keane and Carol Widger
Profession:Maples and Calder

UCITS IV Enhancement Process for Self-Managed Investment Companies

The Central Bank has now confirmed that UCITS organised as self-managed investment companies ("SMICs") will need to complete a UCITS IV enhancement process by 1 July 2013. For most SMICs, this will involve updating business plans and statements of responsibility. In the context of the Central Bank's Consultation Paper 50 engagement and prior to the implementation of the UCITS IV Directive in Ireland on 1 July 2011, the Central Bank indicated that a substantive review of the organisational requirements applicable to SMICs would follow the initial implementation of UCITS IV1. This was founded on the basis of Recital (5) to the UCITS IV Management Company Directive2 which provides that the Directive's rules on administrative procedures and internal control mechanisms should apply to both UCITS management companies and SMICs, taking into account the principle of proportionality. The Central Bank's stated intention has been to complete this second phase "UCITS IV SMIC enhancement process" by 1 July 2013. As you may be aware, there has been some debate on the substantive elements of this review. Initially, the Central Bank proposed to apply all the organisational requirements applicable to UCITS management companies (as contained chapter II of the UCITS IV Management Company Directive), to SMICs. Following industry engagement, this position was reviewed and, most recently, the Central Bank indicated that certain key elements applicable to UCITS management companies would not apply to SMICs given the nature, scale and complexity of the business of a SMIC and the nature and range of services and activities undertaken in the course of that business. This is in line with Recital 5 of the UCITS IV Management Company Directive and the need to consider the principle of proportionality. Specifically, the requirement to appoint a permanent compliance officer will not apply to SMICs, nor will the requirement to establish a permanent internal audit function. However, a range of other obligations will apply to SMICs from 1 July 2013. These include obligations in relation to electronic data processing, accounting procedures, supervisory controls, personal transactions, recording of portfolio transactions, recordkeeping, recording of subscription and redemption orders and some additional general organisational requirements. While not directly related to the introduction of UCITS IV...

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