In this issue we consider the Central Bank’s expectations for compliance with ESMA’s guidelines on liquidity stress testing, the Central Bank’s QIAIF authorisation seminar, the recent clarity on beneficial ownership registers for ICAVs and funds established as unit trusts, ESMA’s clarification on external support under the Money Market Funds Regulation and a number of Brexit-related regulatory statements.

If you would like to discuss any of the topics covered, please feel free to contact a member of our team.

Central Bank Expects Full Compliance with Liquidity Stress Testing Rules by September 2020

On 13 July, the Central Bank published a notice of intention regarding ESMA’s Guidelines on liquidity stress testing in UCITS and AIFs (the “Guidelines”). The Central Bank intends to consult on the incorporation of a requirement in the Central Bank UCITS Regulations 2019 and the AIF Rulebook that UCITS Management Companies, AIFMs and depositaries adhere to the Guidelines. However, the Central Bank has stated that in the interim it expects full compliance with the Guidelines from 30 September 2020.

The ESMA Guidelines apply to fund management companies and provide guidance on how they should manage and monitor the liquidity of the individual funds that they manage and, in particular, how liquidity stress testing (“LST”) should be carried out.

The Guidelines also require the depositary of a fund management company to verify that a fund has documented procedures for its LST programme, which may include reviewing the UCITS and/or AIF risk management process to confirm that the fund management company carries out LST on the fund.

The Central Bank also published updates to both its UCITS and AIFMD Q&As to clarify its expectations regarding compliance with the Guidelines.

For more information, please see our more detailed article here.

Central Bank QIAIF Authorisation Seminar

In late June, the Central Bank convened the second of its fund industry seminars with Irish fund industry representatives to discuss its authorisation and supervision framework for Irish Qualifying Investor Alternative Investment Funds (“QIAIFs”) and to explain some recent changes in its authorisation process.

Several senior representatives of the Central Bank’s funds authorisation and supervision teams spoke at the seminar and covered the following topics:

  • QIAIF applications generally;
  • the need for a pre-discussion with, or a submission to, the Central Bank on infrequent or uncommon asset types or funds with unusual features citing in particular real estate funds and funds investing in life settlements;
  • directors’ time commitments; and
  • the quality and clarity of investment policy disclosure.

The Central Bank used the seminar to continue to emphasise its role in the authorisation and supervision of QIAIFs. The Central Bank emphasised once again the need for Irish fund management company boards to exercise and be able to demonstrate their effective decision-making in relation to the establishment and ongoing operation of funds and in particular noted the requirement to ensure that the QIAIF authorisation process, while not as involved as the UCITS authorisation process, required appropriate due diligence or review prior to a submission being made to the Central Bank.

For more information, please see our more detailed article here.

Beneficial Ownership Registers: Clarity for ICAVs and Unit Trust Funds

On 25 June, the European Union (Modifications of Statutory Instrument No. 110 of 2019) (Registration of Beneficial Ownership of Certain Financial Vehicles) Regulations 2020 (the “Regulations”) were made. The Regulations modify the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019 (the “2019 Regulations”), which set out the beneficial ownership requirements for corporate entities and provide for the establishment of a central register of beneficial ownership.

The Regulations apply the 2019 Regulations, with some exceptions, to an “applicable financial vehicle” which is defined as including an ICAV and an investment fund established as a unit trust. The Regulations also provide for the establishment of a central register of beneficial ownership of ICAVs and investment funds established as unit trusts, and for the appointment of the Central Bank as the registrar of this central register.

Some key points for funds established as ICAVs and unit trusts are highlighted below:


The 2019 Regulations revoked the previous regulations made in November 2016 (S.I 560 of 2016), which gave effect to the requirement for relevant entities, including ICAVs, to establish and maintain a corporate beneficial ownership register. Therefore, ICAVs have been maintaining their own internal beneficial ownership registers. (For more information on the requirements under the 2019 Regulations, please see our previous briefing here). However, ICAVs, could not file this information with the Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies (“RBO”) established under the 2019 Regulations. As noted above, the Regulations provide for the establishment of a central register of beneficial ownership of ICAVs and funds established as unit trusts, and for the appointment of the Central Bank as the registrar of this central register. The register will be known as the Register of Beneficial Ownership of Certain Financial Vehicles (the “CFV Register”) and ICAVs can now file their beneficial ownership information, as detailed further below.

Unit Trust Funds

The Regulations prescribe a threshold for the purposes of identifying a beneficial owner of a unit trust fund. Under the Regulations, a beneficial owner of a unit trust fund is a natural person who owns, or is ultimately entitled to control more than 25% of the units in the trust; or any other natural person exercising ultimate control of the trust by direct/indirect ownership, or by other means. This includes any trustee or settlor. The requirement to include the details of senior managing officials (such as directors of the management company) where no beneficial owners can be identified, does not apply to unit trust funds.

Unit trust funds have been subject to the European Union (Anti-Money Laundering: Beneficial Ownership of Trusts) Regulations 2019 (the “Trusts Regulations”), which deal with trusts generally. The Trusts Regulations introduced a new requirement for trustees to obtain the information in relation to all beneficial owners and to maintain a beneficial ownership register. As the Regulations now apply a 25% beneficial ownership threshold to unit trust funds, this is a welcome development and clarification as unit trust funds will now be treated similarly to corporate funds for the purposes of the beneficial ownership requirements.

While noting the apparent anomaly that currently exists, in that unit trust funds are dealt with in both the Trusts Regulations and the Regulations, it is expected that the Trusts Regulations will be revoked and replaced in due course.

CFV Register filings

Both unit trust funds and ICAVs must file their beneficial ownership information with the Central Bank (as registrar) for inclusion on the CFV Register. Submissions to the CFV Register should be made via the Central Bank’s Online Reporting System (ONR). The Central Bank has opened its submission portal and has published the return form and associated guidance on its website here.

The following details must be included in respect of all beneficial owners: name; date of birth; nationality; whether the person’s interest/control is direct or indirect; the nature of the interest/control; the extent of interest/control (percentage owned or controlled); further information on the nature/extent of ownership/control; the date on which the person was entered into the entity’s internal register as a beneficial owner; and whether the beneficial owner is currently a PCF holder in the entity, or any other Regulated Financial Services Provider. Unlike submissions to the RBO, there is no requirement for ICAVs or unit trust funds to submit PPS numbers to the Central Bank. (For more information on RBO filings, please see our previous briefing here).

ICAVs and unit trust funds in existence as at 25 June 2020 must make their filings by 25 December 2020, and newly established entities must file the information within six months of their date of authorisation.

The Central Bank has stated that it intends to impose a levy in Q1 2021 in respect of the 2020 costs of the CFV Register.

ICAVs and unit trusts funds should be preparing to make their filings in advance of the December deadline. If you have any questions on, or would like to discuss the foregoing in more detail, please do not hesitate to contact a member of our team.

Money Market Funds: ESMA Statement on External Support under MMF Regulation

On 9 July 2020, ESMA published a public statement (“Statement”) on external support under Article 35 of the Money Market Funds Regulation (“MMFR”).

Article 35 of MMFR provides that a money market fund (“MMF”) cannot receive external support, which is defined as:  “direct or indirect support offered to an MMF by a third party, including a sponsor of the MMF, that is intended for or in effect would result in guaranteeing the liquidity of the MMF or stabilising the NAV per unit or share of the MMF”.

Article 35(2) goes on to provide that “external support shall include:

  1. cash injections from a third party;
  2. purchase by a third party of assets of the MMF at an inflated price;
  3. purchase by a third party of units or shares of the MMF in order to provide liquidity to the fund;
  4. issuance by a third party of any kind of explicit or implicit guarantee, warranty or letter of support for the benefit of the MMF;
  5. any action by a third party the direct or indirect objective of which is to maintain the liquidity profile and the NAV per unit or share of the MMF.”

The statement was issued in the context of recent actions taken by central banks and securities regulators to mitigate the impact of COVID-19 on the EU’s financial markets. The market liquidity brought by some of the adopted measures may also indirectly benefit MMFs through the intermediation of credit institutions purchasing short-term assets held by MMFs. Therefore, ESMA felt that it was necessary to clarify the potential interaction between the intermediation of credit institutions and the requirements of Article 35 of MMFR on external support.

ESMA’s statement notes that MMFs may enter into transactions with third parties, including affiliated or related parties provided the requirements of Article 35 of the MMFR are met. For that purpose, ESMA states that it is important to consider, in particular, the following requirements of Article 35 of the MMFR:

  • Article 35(2)(b) of the MMFR provides that external support shall include, amongst other examples, the “purchase by a third party of assets of the MMF at an inflated price”.
    ESMA has clarified that for the purposes of examining whether a third party provides the external support referred to in that point, transactions with third parties relating to the assets of the MMF are not purchased at an inflated price where they are executed at arm’s length conditions;
  • Article 35(2)(e) which provides that external support shall also include “any action by a third party the direct or indirect objective of which is to maintain the liquidity profile and the NAV per unit or share of the MMF”.
    An indication of the direct or indirect objective referred to in that point is where third parties execute transactions solely with the MMFs to which they are affiliated.

The statement also aims to coordinate the supervisory approaches of national regulators in light of these and any future liquidity challenges for MMFs in the context of the current COVID-19 pandemic.

Brexit Statements

With the 31 December deadline fast approaching, there have been a number of Brexit-related statements from regulatory authorities at EU, UK and domestic Irish level, which are summarised below.


ESMA has advised financial market participants to finalise their Brexit preparations and implement suitable contingency plans in advance of the end of the transition period on 31 December 2020. In a statement issued on 17 July, ESMA also confirmed that the previously agreed Memoranda of Understandings on cooperation and information exchange concluded with the FCA remain valid and will come into effect at the end of the transition period.

ESMA also noted that its general opinion to support supervisory convergence in the context Brexit issued on 31 May 2017 and its sector-specific opinions issued on 13 July 2017, remain relevant and should continue to be followed. ESMA will continue to review its Brexit-related statements, in particular in relation to operational issues, and will further communicate in due course.

Central Bank

The Central Bank has confirmed to the Irish Funds Industry Association that the Memorandum of Understanding negotiated between the Central Bank and the FCA last year and the treatment of UK UCITS as eligible investments for UCITS and RIAIFs, per the Central Bank’s previous notice of intention will both apply at the end of the transition period, if required. For more information, please see our previous update here.

FCA: TPR Notification Period to Re-open on 30 September 2020

The FCA announced on 1 July that it would reopen the notification window under the Temporary Permissions Regime (“TPR”) on 30 September 2020. Accordingly, firms and fund managers that have not yet notified to enter the TPR can do so before the end of the transition period (31 December 2020). There will also be an opportunity for fund managers to update their previously submitted notifications, if necessary. The FCA will communicate further on this in September.

The reopening of the TPR is of most relevance for new funds/umbrellas, or where a notification has not already been made. Fund managers that have already notified do not need to take any action, unless they wish to update the previous notification.

European Commission Updates Stakeholder Preparedness Notices

The European Commission has updated its webpage on getting ready for the end of the Brexit transition period. The Commission is reviewing and updating its stakeholder preparedness notices and has published a number of revised notices, including its Asset Management Notice. The notice includes information on both UK and EU asset management activity and reminds stakeholders, including UCITS management companies, AIFMs and investors, to take advantage of the time until 31 December 2020 to ensure that they have taken all the necessary actions to prepare for the end of the transition period. The updated notice replaces the original notice dated 8 February 2018.