1.1 Fund structures1.2 UCITS funds 1.3 Current trends1.4 Establishing a fund in Ireland and appointing service providers1.5 Listing on the Irish stock exchange1.6 Irish Funds Industry Association
1.1 Fund structures
There is a wide variety of fund structures available to promoters in Ireland. The most appropriate structure in a particular case will be governed by factors such as:
- the target investors (retail or institutional)
- the location of the investors (pan-European or single country)
- investment and borrowing policy.
Many funds established in Ireland are UCITS funds i.e. they are established under a common EU framework and benefit from an EU passport. Once authorized in Ireland, a UCITS fund may be sold to the public in other EU states without requiring further authorization in those states. There is a high degree of investor protection associated with UCITS funds and they are also recognized by many non-EU regulators for distribution in their countries. UCITS funds are sold also to institutional investors both within and outside the EU.
For some fund promoters, due to certain investment and borrowing restrictions imposed on UCITS funds, it may not be necessary or desirable to establish a fund as a UCITS. The Irish regulatory framework therefore provides for non-UCITS funds to be established. These funds are typically aimed at more sophisticated investors and enjoy a greater degree of investment freedom than the more retail orientated UCITS funds. Although a non-UCITS fund does not have access to an EU passport, it is possible to achieve a certain amount of cross-border distribution. However, once the Alternative Investment Fund Managers Directive (AIFMD) comes into effect in July 2013, many of these funds will be able to obtain a European passport.
Currently, funds in Ireland can be classified as either UCITS or non-UCITS. UCITS are subject to regulation under the European Directive 2009/65/EC, more commonly known as UCITS IV. Ireland has implemented UCITS IV in full. Separately, in 2013 many non-UCITS will be regulated under the Alternative Investement Managers Directive (AIFMD) sometimes known as the Hedge Fund Directive.
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1.2 UCITS funds
The concept of a UCITS or pan-European fund was introduced by an EU Directive in 1985 and was implemented into Irish law in 1989. Within a few short years, Ireland had established itself as a key pan-European domicile for fund products promoted by most of the world’s largest investment management groups.
A UCITS are technically defined as an Undertakings for the Collective Investment in Transferable Securities. Its permitted range of investments has been expanded in recent years to include the following:
- transferable securities
- money market instruments
- units of a UCITS and, subject to restrictions, units of non-UCITS
- deposits with credit institutions
- financial derivative instruments.
As investor protection is a key feature underlying the UCITS Directive, there are certain restrictions on the investment policy of a UCITS fund. These can be summarised as follows:
- risk spreading rules must be observed whereby no more than 10 percent of net assets may be invested in transferable securities or money market instruments issued by the same body. Furthermore, an overall limit of 40 percent applies where the individual exposure to the issuer of such instruments exceeds 5 percent. The risk spreading rules are modified in the case of index-tracking UCITS funds, fund-of-funds and are relaxed to reflect the lower risk of holding deposits with credit institutions and investing in securities issued by certain credit institutions and certain states
- borrowing of up to 10 percent is permitted for temporary purposes
- there is a limit of 10 percent on investment in unlisted securities
- there are general prohibitions on uncovered sales of instruments and on the acquisition of precious metals, real property or securities where the UCITS would have a significant influence on the issuer
- a UCITS must be open-ended.
While these EU originated restrictions have been designed to protect retail investors, they have not typically reduced the attractiveness of the UCITS product to institutional investors. From a fund promoter’s perspective, the ability to establish a single pan-European UCITS fund with multiple share classes for the retail and institutional markets in various EU jurisdictions is attractive from an operational and commercial perspective. The broadening of the investment policies of UCITS funds to include money market securities, financial derivative instruments and to permit fund-of-funds and index trackers makes the UCITS product increasingly attractive to investment management groups.
One of the most significant changes introduced by UCITS IV is a simplified, more practical application process. Now if an Irish UCITS wants to market (i.e. passport) into other EU states then it applies only to the Irish regulator, the Central Bank. The Central Bank has a short period to process the application. At the end of this time, the Irish regulator will notify the other EU regulators that it has agreed to the passport and it notifies the fund by email that it now has a passport. If any of the EU regulators needs clarification or has concerns, it must contact the Central Bank who will liaise on its behalf with the fund.
Irish authorized UCITS are also distributed internationally. Because UCITS has become a brand name, an Irish UCITS may qualify for a fast track approval process in a number of non-European countries.
While a UCITS fund is sold to pan-European retail and professional investors, a non-UCITS fund is typically sold to more sophisticated investors. The main advantage of non-UCITS funds is that they can use leverage and also enjoy a much greater degree of investment freedom. As a result, specialised funds such as property funds, commodity funds and hedge funds are established as non-UCITS.
Sophistication of target investors
An Irish non-UCITS fund is generally established either as a professional investor fund (PIF) or as a qualifying investor fund (QIF). The main differences in terms of target investors are as follows:
|Eligible investor base
||No rule applies
||1. A professional investor as defined by EU law or 2. An investor who an EU bank, an EU asset manager or UCITS manager considers to have appropriate expertise to understand the investment or 3. An investor who provides written confirmation that either the investor has financial and business expertise to properly evaluate the investment or the investor's business involves similar assets to that of the fund.|
In general, the more sophisticated or wealthy the target investor, the more liberal the investment policy regime that will apply. Consequently, a non-UCITS fund established as a QIF enjoys the greatest degree of investment flexibility. On the other hand, a non-UCITS established with a minimum subscription amount that is lower than EUR100,000 is still generally subject to the risk spreading rules of a UCITS fund.
Relaxing of investment restrictions for PIFs and QIFs
A PIF is permitted to derogate from the UCITS investment restrictions and risk spreading rules on a case by case basis. In general, the Irish Central Bank will give a PIF twice the latitude granted to a UCITS. Furthermore, a PIF is generally permitted to borrow up to 100 percent of its net assets.
A QIF is granted an automatic derogation from most investment and borrowing restrictions imposed on other fund types. Irish domiciled hedge funds are therefore typically established as QIFs.
Cross border distribution of non-UCITS
As a non-UCITS fund does not enjoy an EU passport, it must apply for individual regulatory approval in each country in which it wishes to be distributed to the public. However, as non-UCITS funds are sold only to more sophisticated investors, it is possible to offer shares/units in a non-UCITS fund by means of a private placement in the foreign jurisdiction. The local marketing and distribution laws and regulations in that jurisdiction would need to be observed. Once the AIFMD comes into effect in July 2013, many of these funds will qualify for a European passport.
Money market funds
A money market fund is one that invests in various short term debt instruments such as commercial paper, negotiable certificates of deposit and treasury bills. While these investments are normally purchased in large denominations by institutional investors, this fund structure makes them available indirectly to individual investors.
In order to be classified as a “money market fund” and to apply the amortised cost valuation methodology, a fund must meet specific criteria such as having a triple AAA rating from an internationally recognized rating agency and for its investment manager to have proven expertise in the management of such a fund.
As the name suggests, this type of fund invests in property either directly by holding property or through investing in companies which in turn hold property.
Some of the key issues for the Irish Central Bank are that the fund or its management company must be able to demonstrate expertise in property management. Also, the valuation of the property portfolio must take place at least twice a year and be carried out by a qualified independent valuer. The appointment of such a valuer is subject to the approval of the Central Bank. Industry negotiations are currently under way with the Irish regulator to amend the property funds framework to make them more attractive to investors.
Exchange traded funds (ETFs)
Ireland has become the leading European fund domicile for internationally distributed ETFs. While an ETF can be set up as either a UCITS or non-UCITS, the vast majority are set up as a UCITS.
The Irish legal framework offers a range of vehicle types for funds – variable capital companies, unit trusts, common contractual funds and investment limited partnerships. All of these vehicle types may be structured as umbrellas with (bankruptcy remote) sub-funds. Furthermore, all offer the possibility of having varying share/unit classes.
The variable capital company and unit trust structures are the most commonly used vehicles. The common contractual fund is a vehicle which is particularly suitable for the pooling of pension fund assets. These three vehicles can be used for UCITS and non-UCITS products. The investment limited partnership can only be used for non-UCITS funds. Based on limited partnership structures in Delaware and Bermuda, the Irish equivalent has not proved to be a popular structure and is not considered further in this document.
Variable capital company
A variable capital company (VCC) operates likes any other Irish company but is required under company law to operate with the aim of risk spreading. It operates through a board of directors and may, if it chooses, also appoint a management company. A VCC will typically delegate functions such as investment management, distribution and fund administration/accounting to members of the fund promoter’s group and/or third party service providers. The VCC will also appoint an independent custodian for the fund’s assets. Under UCITS rules, there are specific corporate governance requirements to be fulfilled to ensure that a VCC does not become a “letter box entity.” As a company, a VCC must hold an annual general meeting of its registered shareholders/investors.
A unit trust is formed under a Trust Deed entered into by a management company (typically an Irish regulated subsidiary of the fund promoter) and an independent trustee (typically a custodian bank). A unit trust has no legal personality of its own – it relies on the management company and trustee to enter into contracts on its behalf. Unlike a VCC, a unit trust is not subject to company legislation concerning shareholder meetings or board meetings. However, the unit trust’s management company must, like a VCC, be governed in such a way that it is not a “letter box entity” under the UCITS rules.
Common contractual fund
A common contractual fund (CCF) is established under the law of contract as a contractual co-ownership arrangement. It was specifically designed by the Irish authorities to be a transparent vehicle for tax and legal purposes and is therefore suitable for the pooling of pension scheme assets. A CCF is formed by a deed of constitution entered into by a management company (typically an Irish regulated subsidiary of the fund promoter). The management company usually appoints the investment manager, distributor and custodian and ensures that the VCC is governed in such a way that it is not a “letter box entity” under the UCITS rules.
An Irish fund can be set up as either a single stand alone fund or as an umbrella fund. An umbrella fund is set up by obtaining the Irish Central Bank’s approval to set up one fund but with the possibility of setting up a number of sub-funds governed by the same legal structure. Each sub-fund can invest in different types of assets and have different investors. It is also possible to set up an umbrella fund where each sub-fund is bankruptcy remote from the other sub-funds. The main advantages of this structure are that it reduces costs, improves time to market and allows for a wide variety of products to be offered.
An open ended fund is one which will redeem or repurchase its units at the request of its unit holders. A closed ended fund has a specified life during which the unit holders cannot require the fund to redeem its units. A UCITS must be open ended while a non-UCITS can be either open or closed ended.
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1.3 Current trends
With the increasing sophistication of investment management techniques, fund promoters require their chosen domiciles to offer a range of legal, regulatory and tax solutions in order for the needs of their clients to be met. Ireland has been to the fore in addressing these requirements. This chapter illustrates the flexibility of Ireland, both as a fund domicile and as a fund-servicing centre.
Ireland has a specific legal and regulatory regime to provide a quick and streamlined process to allow non-Irish funds re-domicile to Ireland. Recently, there has been a marked increase in the number of hedge funds that wish to re-domicile to Europe. Some of the reasons behind this include:
- investor preference for a regulated environment
- uncertainty caused by the Alternative Investment Fund Management Directive
- sale of a regulated product increases the potential client base of a fund.
Generally, there is a three stage process consisting of the following.
- Shareholder approval: usually, the first stage involves communicating the proposed re-domiciling to shareholders and obtaining whatever type of approval is required under a fund’s constitutional documents.
- Approval by the Irish Companies Registration Office (CRO): an application is made to the CRO together with specified documentation including a declaration that an application has been made to the Irish regulator.
- Approval by the Irish regulator: a simultaneous application must be made to the Irish regulator for authorization as a UCITS or non-UCITS. Once the Irish regulator has indicated that it proposes to authorize the fund then the CRO will approve the re-registration.
An official list sets out those countries which can avail of this new process. This list will be updated on a regular basis and currently includes the Cayman Islands, Jersey, Bermuda, Guernsey, the Isle of Man and the British Virgin Islands.
Even if a non Irish fund is not a corporate vehicle, it can still be possible to re-domicile it under Irish common law. The Irish regulator has issued guidance on this process.
A hedge fund can be distinguished from the more traditional fund types by exhibiting some or all of the following characteristics:
- it utilizes leverage and appoints a prime broker from whom it borrows and to whom it provides fund assets as security
- it engages in short-selling so that it can take advantage of arbitrage and other investment opportunities and so provide positive returns even in falling markets
- apart from the additional risks associated with these strategies, hedge funds can have an extremely high volume of daily transactions
- hedge funds typically pay a performance fee to the investment manager.
Not only do hedge funds therefore require special regulatory treatment, they also demand a high standard of administration which is readily available in Ireland.
As mentioned previously, many European hedge funds will be subject to the AIFMD in 2013. The Irish regulator and the Irish funds industry has already started work on aligning the current non-UCITS framework to the new directive.
Irish domiciled hedge funds
The Irish Central Bank facilitated the establishment of Irish domiciled hedge funds in 2000 when it introduced new rules which effectively permitted prime brokers to be appointed to Irish funds. As a result, prime brokers could lend to Irish hedge funds and take fund assets as security, even though those assets would leave the custodian’s safekeeping network.
The conditions applying to the appointment of prime brokers have since been refined and can be summarised as follows:
- the value of assets of a hedge fund structured as a PIF must not exceed 140 percent of the fund’s indebtedness to the prime broker unless the prime broker is appointed as a sub-custodian
- there is no such limit if the hedge fund is structured as a QIF and there is no requirement for the custodian to appoint the prime broker as a sub-custodian provided certain conditions are met
- protection mechanisms must be provided for, such as daily marking to market of positions and the existence of a legally enforceable right of set-off for the hedge fund.
Typically, a hedge fund is established as a PIF or a QIF and sold to more sophisticated investors.
Irish domiciled fund of hedge funds
Depending on the target investors such funds can be structured as QIFs, PIFs or as “retail” non-UCITS funds with no minimum subscription. As is the case with traditional funds, a QIF fund of hedge funds is subject to the least amount of investment restrictions.
Since the financial crisis, UCITS funds of hedge funds offering weekly/daily liquidity have also been established in Ireland.
While hedge funds may not currently be authorized as UCITS, relatively recent changes in the UCITS Directives permit UCITS funds to invest in financial derivative instruments (FDI) and to carry out alternative investment strategies. This more flexible approach permits traditional fund products to utilise FDI for investment purposes and not just for hedging or for the purposes of efficient portfolio management.
The main conditions imposed by the Irish regulator on the use of FDI can be summarised as follows:
- the relevant reference item or indices associated with the FDI must be consistent with assets eligible for investment by the UCITS and should not cause the UCITS to diverge from its investment objectives
- the FDI should not expose the UCITS to risks which it could not otherwise assume
- a UCITS must not be leveraged in excess of 100 percent of net asset value
- a risk management process must be employed to monitor, measure and manage the risks attached to FDI positions
- reporting requirements to the Irish Central Bank and to investors in the fund’s annual report must be met.
A core component in the business strategy of many investment managers is to gather and manage assets of pension funds. Multinational corporations themselves with a multitude of individual country pension plans are also seeking to pool assets in these plans in order to reduce costs, enhance returns and improve the risk management environment.
Although the benefits of pension pooling are well documented, there is a potentially serious drawback when equity investments of pension schemes are pooled in a fund vehicle. This relates to the risk that the fund vehicle could suffer higher withholding tax rates than the underlying pension schemes themselves, which in many cases are tax-exempt entities. For example, depending on the domicile of a pension scheme, a loss of 0.6 percent per annum in performance could be incurred by pooling pension scheme assets in a fund investing in US equities (this is known as tax drag). In such cases, a direct investment by the pension scheme in US equities would be advisable.
In view of the withholding tax limitations of certain fund vehicles in addressing the needs of pension schemes, the Irish authorities created a dedicated fund structure – the common contractual fund (CCF). This vehicle was specifically designed in 2003 as a legal and tax transparent fund. The tax transparency of a CCF should ensure that the withholding tax rate applied is based on the tax status of the underlying investor/pension scheme. This should eliminate the tax drag referred to above. In other words, the CCF offers the advantages of pension pooling while not imposing unfavourable withholding tax rates.
There has been a growing level of interest in the CCF with both multinational pension schemes and investment management groups seeking authorization from the Irish Central Bank. Although there are underlying tax and administrative complexities with the CCF, it is widely recognized as a key product to be considered when finding a solution for pension pooling.
The Irish Central Bank has a fast track authorization process for qualifying investor funds (QIFs). In order to avail of this, the service providers (including the promoter, management company, custodian and directors of the QIF) must be already approved by the Irish regulator and confirmation must be provided regarding compliance with the authorization criteria. An application filed no later than 3:00pm on a given day will be approved by the Central Bank by 9:00am the following day.
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1.4 Establishing a fund in Ireland and appointing service providers
Establishing a new fund, either a UCITS or non-UCITS, in Ireland is a straightforward process. The length of time for regulatory approval is normally quite short as the key issue is whether the parties servicing the fund have already been approved by the Irish Central Bank.
There are a number of options available to the fund in terms of its service providers and substance in Ireland. These options range from a “self managed” fund which only appoints a promoter and a custodian to a fund which has a promoter, custodian, management company and fund administrator. A brief description of the roles of the service providers are set out below together with an indication of the main issues that the Irish Central Bank examines in approving these entities.
The application process includes the submission of the following in draft format:
- trust deed, deed of constitution and custodian agreement
- application forms
- risk management documentation.
The Irish regulator will review these documents to ensure that they comply with the appropriate regulatory rules and give comments. Once these comments have been agreed and made, the documentation is finalised and the fund will be authorized. This process normally takes 4-6 weeks.
Although there is no legal or regulatory definition of a promoter, essentially a promoter is the entity which sponsors a fund’s application. The Irish regulator regards the role of the promoter as crucial and therefore will seek to establish that the promoter has the appropriate experience and expertise. Typically, the investment manager of the fund will also act as the promoter.
The application process consists of the submission of a completed application form together with back up documentation including audited accounts. The application material concentrates on establishing the experience and expertise of the management of the promoter, its financial worth and its regulatory status. The application process takes approximately 4-6 weeks but this can proceed in parallel with the fund’s application so that no time is lost. Any OECD regulated entity can apply for authorization as a promoter.
Once a promoter is approved for one Irish fund, it is free to establish any number of future Irish funds. On an ongoing basis, the promoter has a capital requirement to have net positive shareholders’ funds of EUR635,000. The regulatory regime for promoters largely consists of the submission of half yearly accounts and annual audited accounts.
Who needs a management company?
A unit trust and a common contractual fund must always appoint a management company. However, a fund that is set up as a variable capital company does not need to appoint a management company and instead may be a “self managed” fund managed directly by its own board of directors. Once a management company has been approved by the Irish Central Bank, it can manage any number of Irish funds.
What does a management company do?
As the name suggests, a management company provides for the management and control of an Irish fund. However, it is normal for a management company to delegate some of its activities to an investment manager and a fund administrator.
What does the application process consist of?
UCITS management companies
The application process for a management company is more detailed than that of a promoter. The application consists of the submission of:
- application form
- business plan
- individual questionnaires for the directors and senior managers of the management company.
Again, in assessing such an application, the Irish regulator will concentrate on the expertise in the proposed management company and also its financial standing. Since 1 July 2011, an Irish management company may passport its services into any EU country.
The Irish regulator has issued a guidance note on the substance requirements for UCITS management companies which is UCITS IV compliant. This guidance note sets out that the management company must have at least two Irish directors. Also, the management function should include the following:
- decision making
- monitoring compliance
- risk management
- monitoring of investment performance
- financial control
- monitoring of capital
- internal audit
- supervision of delegates
- complaints handling
- accounting policies and procedures.
In its guidance note, the Irish regulator has stressed that although a management company may delegate some of its functions, it may not do so to the extent that it becomes a “letter box entity.”
There is a more detailed regulatory regime in place for management companies. The regulatory rules consist of ongoing financial reporting i.e. half yearly financial and annual audited accounts. In terms of capital, the management company must have the higher of EUR125,000 or a quarter of last year’s fixed overheads. In addition, if the net asset value (nav) of the funds under management exceeds EUR250 million, the management company must provide additional capital of 0.02 percent of the amount of the nav exceeding EUR250 million subject to an overall maximum of EUR10 million.
Non-UCITS management company
There are no fixed rules in terms of the application materials that must be submitted for a non-UCITS management company and so the application process is normally shorter. The ongoing supervisory requirement for a non-UCITS management company is similar to that of a UCITS management company i.e. its capital requirement is that it maintains the higher of EUR125,000 or a quarter of last year’s fixed overheads. It must also submit half yearly financial and annual audited accounts.
The regulation of these management companies will change in 2013 when they will be subject to the AIFMD.
The investment policy of each fund is set out in its prospectus. However, the day to day management of the portfolio is usually delegated to an investment manager.
While there are a number of investment managers based in Dublin, most investment managers of Irish domiciled funds are non-Irish domiciled.
The investment manager of an Irish fund needs to be approved by the Central Bank. The speed of the approval is determined by the regulatory status of the investment manager e.g. an EU MiFID firm or SEC regulated firm will receive very speedy approval.
New Irish investment manager
However, if it is proposed to establish a new investment manager in Ireland then such an entity will normally require to be regulated under MiFID. This is a detailed application which consists of:
- the submission of application forms
- business plan
- financial projections
- individual questionnaires for directors and senior managers.
Such an application takes about between 4-6 months.
Once authorized, an investment manager is subject to a number of regulatory requirements including a code of conduct. It will also be subject to the Capital Requirements Directive and must submit management accounts and capital adequacy returns either monthly or quarterly. In addition, it must submit its annual audited accounts. In certain circumstances, the investment manager may also be subject to client asset rules.
Every fund must appoint an independent trustee or custodian whose prime role is to safeguard the assets of the fund and act in the interests of investors.
Who can be a custodian?
A custodian must be:
- a credit institution authorized in Ireland or
- an Irish branch of an EU credit institution
- an Irish incorporated company which is wholly owned by an EU credit institution or equivalent in another jurisdiction provided that the liabilities of the Irish company are guaranteed by the parent institution.
The Irish funds industry is served by all the large global custodians as well as regional custodian banks, all of whom have been approved by the Irish regulator.
The regulation of Irish custodians will be subject to significant changes under the draft UCITS V and the AIFMD.
What does a trustee/custodian do?
Every Irish domiciled fund must appoint either an Irish trustee or an Irish custodian. In the case of a fund established as a company, it will appoint a custodian while a unit trust will appoint a trustee. Generally, there is little difference between the function which will be carried out by a custodian and that carried out by a trustee.
The essential role of a trustee is to protect the interests of the unit holders and to safeguard the fund’s assets. This means that the custodian will hold the assets of a fund on an ongoing basis, it will ensure that the investment management of the fund is carried out within the terms of the prospectus and that the pricing of the fund is properly carried out. The custodian issues an annual report on these matters which is provided to the fund’s unit holders and to the Irish Central Bank.
Standard of care
The standard of care required of the trustee varies between UCITS and non-UCITS. In the case of a UCITS fund, a trustee is liable for any loss suffered as a result of its unjustifiable failure to perform its obligations or its improper performance of them. With a non-UCITS fund, the custodian will be liable for fraud, negligence, wilful default, bad faith or reckless disregard of its obligations.
No company may act as both a management company and a custodian. Transactions between a manager and a custodian must be carried out at arm’s length and solely in the interest of the investors. There can be no common directors between the trustee and the fund for which it acts.
If it so chooses, a management company can delegate part of its functions to a fund administrator. A fund administrator basically provides the back office services for a fund. Its main duties involve providing a net asset value, fund accounting and processing of subscriptions and redemptions of the fund. Fund administrators in Ireland are regulated under the Investment Intermediaries Act 1995 and/or the Markets in Financial Instruments and Miscellaneous Provisions Act 2007. The application process is very similar to that of an investment manager and includes application forms, business plan and individual questionnaires for directors.
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1.5 Listing on the Irish stock exchange
The Irish Stock Exchange (The Exchange) is recognized worldwide as a leading centre for listing investment funds. This has been achieved through a combination of effective and prudent regulation, flexibility, efficiency and timely processing of listing applications. The Exchange is regulated by the Irish Central Bank.
There are a number of reasons why a fund would decide to list on the Irish Stock Exchange including:
A listing increases a fund’s potential investor base
Certain institutional investors are restricted or prohibited from investing in unlisted securities or securities which are not listed on a recognized regulated stock exchange. Listing on the Irish Stock Exchange enables a fund to market to these institutional investors.
A listing allows investors to mark their fund investment to market
Many fund investors require a publicly quoted stock exchange price for their investment.
A listing increases a fund’s prestige and profile
The fact that the Exchange is a recognized European Exchange which is well established and regulated can be used as a marketing tool by fund promoters.
Listing provides publicly available information for investors
All net asset values of listed funds are reported through the Exchange’s information system and are carried by Reuters, Bloomberg and other news services. They are also available to investors on the Exchange’s own website.
The listing process consists of the following steps:
Step 1: Appoint a sponsor
Each applicant fund must appoint a sponsor. Currently there are nine authorized sponsors in Ireland. These sponsors are responsible for ensuring that the applicant fund is suitable for listing before submission of any documentation through the Exchange and then deals with the Exchange on all matters relating to the matters relating to the application.
Step 2: Comply with Exchange conditions for listing
The requirements for listing a fund on the Exchange are set out in a rule book known as “Investment Fund - Listing Requirements and Procedures” or more commonly as the “Green Book”. These rules are based on the listing rules of the London Stock Exchange known as the “Yellow Book”. The sponsor must ensure that the fund can meet the conditions for listing before applying to the Stock Exchange. However, there is a great deal of overlap between the Exchange conditions for listing and the authorization conditions imposed by the Irish regulator.
Step 3: Submit draft listing document/prospectus to the Exchange for approval
The sponsor will ensure that the fund submits a listing document for review by the Exchange. Usually this document will also be the prospectus which is used to promote the fund to the investors. There are a number of specific disclosures that must be included in the prospectus.
Step 4: Approval of listing document and submission of “48 hour” documents
Once approved by the Exchange, the listing document must be signed off by the sponsor and the fund’s directors before publication. In addition, backup documentation including specific contracts, certain documents and directors’ details and confirmations must be submitted at least 48 hours before the fund is due to list.
Step 5: Listing
Once shares or units in the fund are issued, the listing will proceed on the day requested by the fund promoters.
Step 6: Ongoing obligations
Once listed, fund must continue to comply with conditions for listing and must comply with certain ongoing obligations of the Exchange.
The Exchange has listed funds that are registered/domiciled in almost every established funds centre in the world. However a fund which is not subject to regulation within the EU, the Channel Islands, the Isle of Man, Bermuda or Hong Kong must be confined to sophisticated investors i.e. have a minimum subscription of USD100,000 (or equivalent).
General disclosure obligation
A listed fund must immediately inform the Exchange of any price sensitive information, material new developments and any material change in performance or financial position.
Annual accounts must be sent to the Exchange and unitholders within 6 months of the accounting year end. There is a similar requirement for interim accounts, with the deadline changing to 4 months.
Notifications must be made where there is an alteration to capital e.g. new issues of debt securities or issues effecting conversion rights.
Interests in units
Notifications must be made in relation to controlling shareholders’, directors’ or investment manager’s interests, and for closed ended funds, holdings of 10 percent or more in the fund’s share capital.
Proposed variation in the rights of unit holders require prior notification and in certain circumstances prior approval.
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1.6 Irish Funds Industry Association
The Irish Funds Industry Association (IFIA) is a representative body for the Irish funds industry. It was founded in 1991 and it represents fund promoters, managers, custodians, administrators and professional advisory firms involved in the funds industry in Ireland. Membership of the association represents the entire spectrum of service providers and professional advisors in Ireland.
The IFIA plays an important role in raising the profile of the funds industry in Ireland and promoting Ireland as the prime domicile for UCITS and the preferred choice for the administration of funds, particularly hedge funds.
The IFIA has a full time secretariat based in the Irish International Financial Services Centre. It has a number of representative offices in New York, Boston, Chicago, Atlanta and London.
The IFIA has an elected council of 12 members which govern the association. In addition, there are a number of subcommittees and working groups within the IFIA and these include:
- legal and regulatory
- HR and training
- transfer agency
- alternative investments.
KPMG is well represented on these committees and also is a regular participant in submissions.
The IFIA also represents Ireland at the European Federation of Investment Funds Association (FEFFI) and monitors closely the work carried out by the European Securities & Markets Authority (ESMA).
Through their representation on and participation in governmental and industry committees, both the IFIA and KPMG have played an important role in the development of Ireland’s regulatory and legislative framework. The IFIA is also a valuable information resource for the industry in the various papers and technical briefings which it provides.
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