Ireland to overhaul funds regime

Ireland’s financial regulator, the Irish Central Bank, confirmed proposed changes to its investment funds framework in light of upcoming Alternative Investment Fund Mangers (AIFM) directive rulemaking. 

Addressing the Irish Funds Industry Association (IFIA) Wednesday, Matthew Elderfield, the Central Bank’s deputy governor, said the bank will consider creating a new type of investment fund that complies in full with the AIFM, without the burden of any additional domestic requirements.

Changes to Ireland’s current Qualifying Investor Funds (QIF) regime, the most common structure for private equity funds, are also on the table. For instance the Central Bank will consult with industry stakeholders on removing the QIF’s promoter requirement. 

The Central Bank requires promoters to have a level of capital that is typically higher than is required by the promoter’s own regulator despite the fact that the promoter does not have any contractual obligation to the fund.  

The promoter regime was premised on having a regulated entity with a high degree of capital that would take moral responsibility for the fund. As all funds will now be managed by regulated AIFMs,  having this additional layer of regulation is no longer necessary.

“The issue with the AIFMD is that it regulates the manager and not the fund so what the Central Bank are looking to see is to what extent changes to fund level regulation is required,” said Declan O’Sullivan, managing partner of Dechert’s Dublin office and former Chairperson of the Alternative Investments Committee of the Irish Funds Industry Association.

How funds are authorised will be one part of this fund-level regime review process. Elderfield said the bank will look for ways to improve the efficiency of authorisation and consider electronic filing.

The Central Bank plans to publish detailed rules explaining its approach to the granular details of the AIFM directive, which must be transposed into EU member states law by July 2013, later this October.