Updated Central Bank UCITS Regulations Published

In March 2018, the Central Bank issued Consultation Paper 119 (“CP 119”) on amendments to and consolidation of the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferrable Securities) Regulations 2015 (“Central Bank UCITS Regulations”). In CP119, the Central Bank consulted on proposed amendments to the Central Bank UCITS Regulations 2015 under the following four headings:

  • general amendments arising from a review of the existing regulations;
  • amendments to reflect ESMA’s opinion on share classes;
  • amendments regarding UCITS performance fees; and
  • amendments resulting from the implementation of the Money Market Funds Regulation.

On 6 June 2019, the Central Bank noted the publication of the updated and consolidated Central Bank UCITS Regulations 2019 (the “Updated Regulations”) and issued its feedback statement on CP119, together with an updated version of its UCITS Q&A.

Key points for consideration include the following:


The Central Bank’s existing guidance on performance fees has been codified in the Updated Regulations, which also introduce a requirement for a minimum crystallisation frequency. Performance fees may now only crystallise and be paid once per annum. However, there is an 18 month grandfathering period for funds in existence as at 27 May 2019 (the date the Updated Regulations took effect) to comply with this requirement. The Central Bank has also clarified that the crystallisation and payment of a performance fee by a UCITS upon redemption is not considered an annual calculation for the purposes this requirement (new UCITS Q&A #1091).

The updated UCITS Q&A also provides that it is permissible to charge performance fees at (i) an individual investor level, or (ii) at a share class/fund level, as adjusted for subscriptions and redemptions (new Q&A #1090).


The Updated Regulations also place the Central Bank’s existing guidance on share classes on a statutory footing. Following stakeholder feedback and noting that the wording of its provision on under-hedged positions was not consistent with the ESMA opinion on share classes, the Central Bank has redrafted the provision to provide that under-hedged positions should not fall below 95% of the portion of the NAV of the share class. (As originally proposed, the reference was to 95% of the NAV of the share class). A UCITS’ annual and semi-annual reports must now include a list of all share classes (that are in issue during the relevant period) together with an indication as to whether or not they are hedged.


The updated Regulations clarify that a UCITS’ first annual audited accounts, (to be prepared within 18 months of incorporation), must include all sub-funds launched as at that date. The second set of accounts for UCITS Management Companies and Depositaries should cover the full 12 months of the financial year and these accounts must be filed with the Central Bank within 1 month of the year-end. If you would like to discuss the foregoing in more detail, or require any assistance in assessing your requirements under the Updated Regulations, please feel free to contact any member of our team.

EMIR Refit – Action Required by 17 June 2019

EMIR Refit entered into force on 28 May 2019 and will apply from 17 June 2019. It amends the existing EMIR Regulation, which regulates OTC derivatives and applies to both financial counterparties (“FC”) (which includes investment funds, AIFMs, and UCITS Management Companies) and nonfinancial counterparties (including SPVs). EMIR Refit sets out certain calculation and notification obligations for FCs, regarding the EMIR clearing obligation and these must be complied with on 17 June 2019.

Under EMIR, an FC is subject to the clearing obligation in respect of all OTC derivative contracts, irrespective of their aggregate value. EMIR Refit introduces a new category of small financial counterparty (“SFC”), which is exempt from the clearing obligation. To be classified as an SFC and benefit from the clearing exemption, FCs must calculate their OTC positions on 17 June 2019 and if they come within the specified clearing thresholds (set out per asset class) then they will be exempt from the clearing obligation.

Therefore, under EMIR Refit, any investment fund that transacts derivatives must, on 17 June 2019 (and on each anniversary thereof), either:

  • calculate at a sub-fund level (including any subsidiaries) its aggregate month-end average position for the previous 12 months against the applicable clearing thresholds, record this calculation, and, if a clearing threshold is exceeded, notify ESMA and the Central Bank and prepare to clear future OTC derivative transactions (by 18 October 2019); or
  • if it does not make the calculations as described above on time, notify ESMA and the Central Bank and prepare to clear future OTC derivative transactions (in each case irrespective of what the result of the calculations would have been had the calculations in fact been made on 17 June 2019 or, as applicable, the anniversary thereof).

The Central Bank has contacted investment fund boards with regard to these requirements and has set out the relevant notification procedures:

  • where an investment fund is required to notify that it is subject to the clearing obligation the following notification needs to be completed and submitted to the Central Bank of Ireland. The notification also needs to be submitted to ESMA. For details on the notification procedure for ESMA please see link to ESMA website which includes details on the email address to be used (EMIR-notifications@esma. europa.eu) for such notifications;
  • the notification should be submitted to the Central Bank of Ireland as a ‘Regulatory Report’ via the ONR System; and
  • if an investment fund wishes to notify the Central Bank of Ireland that its position no longer exceeds the threshold it needs to submit the following notification to the Central Bank of Ireland and ESMA. Again, the submission to the Central Bank of Ireland should be as a ‘Regulatory Report’ via the ONR System.

ESMA has also updated its EMIR Q&As, (in particular OTC questions 2, 4, 20 and 25), which provide further guidance on the clearing obligation for counterparties.


EMIR Refit also extends the scope of EMIR by extending the definition of FC to include all EU AIFs, irrespective of whether or not their AIFM is non-EU established. The EMIR reporting obligation is also amended to provide that where an OTC derivative transaction is entered into by a UCITS, its management company is responsible for meeting the reporting obligation and ensuring the accuracy of the reports. An AIFM will be similarly responsible where the OTC derivative contract is entered into by an AIF. For more information on EMIR Refit, please see our previous briefing here.

If you would like to discuss these requirements in more detail, please feel free to contact any member of our team.

Central Bank Concludes Thematic Review of UCITS Performance Fees

On 4 September 2018, the Central Bank published the findings of a thematic review it had undertaken of UCITS performance fees. The review was carried out on a sample set of UCITS funds to determine whether the methods used to calculate and pay performance fees in UCITS ensure that investors’ interests are safeguarded at all times. The Central Bank reviewed the methodologies and parameters selected and applied in the calculation of UCITS performance fees, and assessed whether these were in line with the Central Bank’s UCITS Performance Fees Guidance (the “Guidance”). The Central Bank had expressed its concern that the Guidance was being inconsistently applied and its findings included actions to address the issues identified in its review, including requiring all UCITS management companies (including self-managed investment companies) whose UCITS charge performance fees to:

  • review their existing performance fee methodologies and be satisfied that these were in compliance with the Guidance;
  • and provide written confirmation by 30 November 2018 to the Central Bank that this review had been conducted.

In its latest Markets Update (6 June 2019), the Central Bank has confirmed that, as required, UCITS Fund Management Companies of all UCITS that charge performance fees have reviewed their performance fee methodologies and reported their findings to the Central Bank. The Central Bank has noted that a total of €1.5m has been refunded to 636 shareholders and 12 risk mitigation programmes have issued across individual UCITS and fund service providers. The Guidance is now codified in the updated Central Bank UCITS Regulations 2019 and the Central Bank has stated that the area of investment fund fees will remain a supervisory priority.

FCA Extends TPR Notification Deadline to 30 October 2019

On 24 May 2019, the FCA confirmed that, following the extension of Brexit to 31 October 2019, the notification period under its temporary permissions regime would be extended and will now close on 30 October 2019. In its communication, the FCA notes that:

  • any fund managers wishing to update their notification before the notification window closes on 30 October 2019, must email [email protected] by 16 October 2019 confirming this and including their FCA registration number;
  • fund managers should note that while the FCA will acknowledge requests to update notifications, it will not be possible to submit a new notification until after 16 October 2019 when the FCA will be in contact with details of the steps fund managers will need to take; and
  • fund managers should also continue to follow current processes via their home state regulator for adding new funds. Fund managers should note that while they can create new draft notifications on the Connect system to monitor their fund population, they will not be able to actually submit an updated notification until later in October and then only if they have advised the FCA that they wish to do so.

Depositaries: ESMA Updates its AIFMD and UCITS Q&A

On 4 June 2019, ESMA published updated versions of its AIFMD and UCITS Q&A with respect to depositaries. The updated Q&As relate to the following:

  • the distinction between depositary functions and mere supporting tasks that are not subject to the delegation requirements set out in the AIFMD and the UCITS Directive;
  • the delegation of safekeeping functions;
  • the performance of depositary functions where there are branches in other Member States;
  • the supervision of depositary functions in case of branches in other Member States; and
  • the delegation of depositary functions to another legal entity within the same group.

ESMA also recently updated the following Q&As:

  • MiFID II/ MiFIR Q&A: (Investor Protection & Intermediaries) This Q&A was updated on 29 May in respect of best execution and information on fee and charges.
  • Securitisation Regulation Q&A were updated on 27 May to provide further indicative guidance on templates contained in ESMA’s draft technical standards on disclosure requirements under the Securitisation Regulation. It also covers notifications to ESMA of simple, transparent and standardised (STS) securitisations.
  • Benchmarks Regulation Q&A were updated on and provide clarification on:
    • the information included in the ESMA register of benchmarks administrators;
    • determination of the Member State of reference; and
    • the role of IOSCO principles and of external audit in the recognition of 3rd country administrators.

Sustainable Finance: ESMA Establishes Coordination Network on Sustainability

ESMA has established (23 May 2019) a Coordination Network on Sustainability (CNS). The CNS was created to promote the coordination of national competent authorities’ work on sustainability. It will be responsible for the development of policy in this area with a strategic view on issues related to integrating sustainability considerations into financial regulation. ESMA’s press release notes that: “ESMA and European securities regulators should make sustainable finance an integral part of their supervisory and enforcement activities”.