S.I. No. 352/2011 - European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011

TA B LE OF CONTENTS

PART 1 Preliminary

1.

2.

3.

PART 2 Scope

4.

5.

6.

PART 3 Authorisation of UCITS

7.

8.

9.

10.

11.

12.

13.

14.

PART 4 Obligations regarding Management Companies

Chapter 1 Conditions for taking up business

15.

16.

17.

18.

Chapter 2 Relations with third countries

19.

Chapter 3 Operating conditions

20.

21.

22.

23.

24.

25.

Chapter 5 Freedom of establishment and freedom to provide services

26.

27.

28.

29.

30.

31.

32.

PART 5 Obligations Regarding trustee

33.

34.

35.

36.

37.

38.

PART 6 Obligations Regarding Investment Companies

Chapter 1 Conditions for taking up business

39.

40.

41.

42.

Chapter 2 Operating conditions

43.

44.

45.

Chapter 3 Obligations regarding trustee

46.

47.

48.

49.

50.

51.

52.

53.

54.

PART 7 Mergers of UCITS

55.

56.

57.

58.

59.

60.

61.

62.

63.

64.

65.

66.

PART 8 Obligations concerning Investment Policies of UCITS

67.

68.

69.

70.

71.

72.

73.

74.

75.

76.

77.

PART 9 Master — Feeder Structures

Chapter 1 Scope and approval

78.

79.

80.

81.

82.

83.

84.

85.

86.

87.

PART 10 Obligations concerning Information to be provided to Investors

Chapter 1 Publication of prospectus and periodical reports

88.

89.

90.

91.

92.

93.

94.

95.

Chapter 2 Publication of other information

96.

97.

Chapter 3 Key investor information

98.

99.

100.

101.

102.

PART 11 General Obligations of UCITS

103.

104.

105.

106.

107.

108.

109.

110.

111.

112.

113.

114.

PART 12 Special Provisions Applicable to UCITS which Market their Units in Member States other than those in which they are established

115.

116.

117.

118.

119.

120.

PART 13 Provisions Concerning Authorities Responsible for Authorisation and Supervision

121.

122.

123.

124.

125.

126.

127.

128.

129.

130.

131.

132.

133.

134.

135.

136.

137.

PART 14 Derogations, Transitional and Final Provisions

138.

139.

SCHEDULE 1 Functions included in activity of Collective Portfolio Management

SCHEDULE 2 Transferable Securities

PART 1 Criteria Applicable to Transferable Securities which fall within paragraph (a), (b) or (c) of definition in regulation 3(1) of “transferable securities”

PART 2 Securities specified for purposes of paragraph (d) of definition in regulation 3(1) of “Transferable Securities”

SCHEDULE 3 Interpretation of references in these regulations to money market instruments

SCHEDULE 4 Prudential requirements applicable to Management Companies

SCHEDULE 5 Conduct requirements applicable to Management Companies

SCHEDULE 6 Particulars of Standard Agreement Between Trustee and Management Company

SCHEDULE 7 Detailed content, format and method by which to provide information referred to in regulation 61

SCHEDULE 8 Provision of Key Investor Information

SCHEDULE 9 Requirements Applicable to Risk Management

SCHEDULE 10 Requirements applicable to Master-Feeder Structures

PART 1 Content of Information Sharing Agreement between master ucits and feeder ucits

PART 2 Liquidation, Merger or Division of Master UCITS

PART 3 Content of Information Sharing Agreement where Master UCITS and Feeder UCITS have different Trustees

PART 4 Content of Information Sharing Agreement where Master UCITS and Feeder UCITS have different auditors

SCHEDULE 11 Information to be contained in prospectus

SCHEDULE 12 Information to be contained in periodic reports

SCHEDULE 13 Information to be made accessible by Bank

SCHEDULE 14 Notification Requirements

SCHEDULE 15 Requirements Applicable to Simplified Prospectus

SCHEDULE 16 Table of Cross-References To Specific UCITS Regulations in Legislation

PART 1 Unit Trusts Act 1990 (No. 37 of 1990)

PART 2 Companies Act 1990 (No. 33 of 1990)

PART 3 Investment Funds, Companies and Miscellaneous Provisions Act 2005 (NO. 12 OF 2005)

SI. No. 352 of 2011

EUROPEAN COMMUNITIES (UNDERTAKINGS FOR COLLECTIVE INVESTMENT IN TRANSFERABLE SECURITIES) REGULATIONS 2011

Notice of the making of this Statutory Instrument was published in

“Iris Oifigiúil” of 8th July, 2011.

I, MICHAEL NOONAN, Minister for Finance, in exercise of the powers conferred on me by section 3 (as amended by section 2 of the European Communities Act 2007 (No. 18 of 2007)) of the European Communities Act 1972 (No. 27 of 1972), and for the purpose of giving effect to Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009¹ , Commission Directive 2010/43/EU of 1 July 2010² and Commission Directive 2010/44/EU of 1 July 2010³ , hereby make the following Regulations:

PART 1 Preliminary

Citation

Commencement

Interpretation — general

“articles”, in relation to a company, has the meaning assigned to it by the Companies Act 1963 (No. 33 of 1963);

“Bank” means the Central Bank of Ireland;

“branch”, in relation to a management company, means, subject to paragraph (2), a part of the company which has no legal personality and which provides services for which the company has been authorised;

“client” means a natural or legal person, or any other undertaking (including a UCITS), to whom a management company provides a service of collective portfolio management or services pursuant to Regulation 16(2)(a);

“close links” means a situation in which 2 or more natural or legal persons are linked by—

• (a) participation, being the ownership, direct or by way of control, of 20% or more of the voting rights or capital of an undertaking, or

• (b) subject to paragraph (3), control, being the relationship between a parent undertaking and a subsidiary, as defined in Articles 1 and 2 of the Seventh Council Directive 83/349/EEC of 13 June 1983⁴ based on Article 54(3)(g) of the Treaty on consolidated accounts and in all the cases referred to in Article 1(1) and (2) of Directive 83/349/EEC, or a similar relationship between any natural or legal person and an undertaking;

“collective portfolio management” means the management of UCITS and other collective investment undertakings, and includes the functions specified in Schedule 1;

“common contractual fund” means a collective investment undertaking, being an unincorporated body established by a management company under which the participants by contractual arrangement participate and share in the property of the undertaking as co-owners;

“Community act” means an act adopted by an institution of the European Communities;

“competent authority” means the Bank or, in the case of another Member State, the body or bodies designated by that State to act as a competent authority for the purposes of the Directive;

“counterparty risk”, in relation to a UCITS, means the risk of loss for the UCITS resulting from the fact that the counterparty to a transaction entered into by the UCITS may default on its obligations prior to the final settlement of the transaction’s cash flow;

“court” means the High Court;

“credit institution” means a credit institution within the meaning of Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006⁵ relating to the taking up and pursuit of the business of credit institutions (recast);

“cross-border merger” means a merger of UCITS—

• (a) at least 2 of which are established in different Member States, or

• (b) established in the same Member State into a newly constituted UCITS established in another Member State;

“debt securities” has the meaning assigned to it by paragraph (b) of the definition in this Regulation of “transferable securities”;

“Directive” means Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (recast), including the associated implementing measures contained in Directive 2010/43 and Directive 2010/44/EU;

“Directive 2010/43/EU” means Commission Directive 2010/43/EU of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards organisational requirements, conflicts of interest, conduct of business, risk management and content of the agreement between a depositary and a management company;

“Directive 2010/44/EU” means Commission Directive 2010/44/EU of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards certain provisions concerning fund mergers, master-feeder structures and notification procedure;

“directors”, in relation to a management company, investment company or trustee, means those persons who—

• (a) under the Companies Acts or the trust deed or the deed of constitution or the memorandum and articles of association, represent the management company, the investment company or the trustee, as the case may be, or

• (b) who effectively determine the policy of the management company, the investment company or the trustee, as the case may be,

and includes shadow directors within the meaning of the Companies Act 1990 (No. 33 of 1990);

“domestic merger” means a merger between UCITS established in the same Member State where at least one of the involved UCITS has been notified pursuant to Regulation 117;

“durable medium” means an instrument which enables an investor to store information addressed personally to the investor in a way that is accessible for future reference for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored;

“enactment” means a statute or an instrument made under a power conferred by a statute;

“individual portfolio management services” means the services referred to in subparagraph (a) of paragraph (2) of Regulation 16, and includes the discretionary portfolio management services referred to in clause (i) of that subparagraph and the non-core services referred to in clause (ii) of that subparagraph;

“initial capital” means the funds as referred to in Article 57(a) and (b) of Directive 2006/48/EC;

“investment company” means—

• (a) an investment company with fixed capital, or

• (b) an investment company with variable capital;

“investment company with fixed capital” means a company so referred to in Regulation 4(6)(b);

“investment company with variable capital” means a company so referred to in Regulation 4(6)(c);

“issue” means the issue of units of a UCITS;

“KII Regulation” means Commission Regulation (EU) No. 583/2010 of 1 July 2010⁶ implementing Directive 2009/65/EC of the European Parliament and of the Council as regards key investor information and conditions to be met when providing key investor information or the prospectus in a durable medium other than paper or by means of a website;

“liquidity risk”, in relation to a UCITS, means the risk that a position in the UCITS portfolio cannot be sold, liquidated or closed at limited cost in an adequately short time frame and that the ability of the UCITS to comply at any time with Regulation 104(1) is thereby compromised;

“management company” means a company the regular business of which is the management of UCITS in the form of unit trusts, common contractual funds or investment companies (or any combination thereof), and includes the functions specified in Schedule 1;

“management company’s home Member State” means the Member State in which the management company has its registered office;

“management company’s host Member State” means a Member State, other than the management company’s home Member State, within the territory of which the management company has a branch or provides services;

“market risk”, in relation to a UCITS, means the risk of loss for the UCITS resulting from fluctuation in the market value of positions in the UCITS portfolio attributable to changes in market variables, such as interest rates, foreign exchange rates, equity and commodity prices or an issuer’s creditworthiness;

“Member State” means a Member State of the European Union;

“merger” means an operation whereby—

• (a) one or more UCITS or sub-funds thereof (“merging UCITS”), on being dissolved without going into liquidation, transfer all of their assets and liabilities to another existing UCITS or a sub-fund thereof (“receiving UCITS”), in exchange for the issue to their unit-holders of units of the receiving UCITS and, if applicable, a cash payment not exceeding 10% of the net asset value of those units,

• (b) 2 or more UCITS or sub-funds thereof (“merging UCITS”), on being dissolved without going into liquidation, transfer all of their assets and liabilities to a UCITS which they form or a sub-fund thereof (“receiving UCITS”), in exchange for the issue to their unit-holders of units of the receiving UCITS and, if applicable, a cash payment not exceeding 10% of the net asset value of those units, or

• (c) one or more UCITS or sub-funds thereof (“merging UCITS”), which continue to exist until the liabilities have been discharged, transfer their net assets to another sub-fund of the same UCITS, to a UCITS which they form or to another existing UCITS or a sub-fund thereof (“receiving UCITS”);

“merging UCITS”, in relation to a merger, means a merging UCITS as specified in paragraph (a), (b) or (c) of the definition in this Regulation of “merger”;

“MIFID” means Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004⁷ on markets in financial instruments amending Council Directives 85/611/EC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EC;

“MIFID Regulations” means the European Communities (Markets in Financial Instruments) Regulations 2007 ( S.I. No. 60 of 2007 );

“money market instruments” means instruments normally dealt in on the money market which are liquid and have a value which can be accurately determined at any time, as construed in accordance with paragraph (4) as read with Schedule 3;

“operational risk”, in relation to a UCITS, means the risk of loss for the UCITS resulting from inadequate internal processes and failures in relation to people and systems of the management company concerned or from external events, and includes legal and documentation risk and risk resulting from the trading, settlement and valuation procedures operated on behalf of the UCITS;

“OTC derivative” means a financial derivative instrument dealt in over-the-counter;

“own funds” means, subject to paragraph (5), own funds as referred to in Title V, Chapter 2, Section 1 of Directive 2006/48/EC;

“parent undertaking” means a parent undertaking as defined in Articles 1 and 2 of the Seventh Council Directive 83/349/EEC;

“proposed management company” means a person who is seeking authorisation from the Bank to be an authorised management company;

“qualifying holding”, in relation to a proposed management company or authorised management company, means, subject to paragraph (6)—

• (a) a direct or indirect holding of shares or other interest in the company which represents 10% or more of the capital of, or the voting rights in, the company, or

• (b) a direct or indirect holding of shares or other interest in the company which is less than 10% of the capital of, or the voting rights in, the company which, in the opinion of the Bank, makes it possible to exercise a significant influence over the management of the company in which the holding subsists;

“qualifying shareholder” means a person who has or controls a qualifying holding;

“rebalancing of the portfolio”, in relation to a UCITS, means a significant modification of the composition of the portfolio of the UCITS;

“receiving UCITS”, in relation to a merger, means a receiving UCITS as specified in paragraph (a), (b) or (c) of the definition in this Regulation of “merger”;

“redemption” means the purchase of units from a holder by a management company or investment company;

“relevant person”, in relation to a management company, means—

• (a) a director, partner or equivalent, or manager, of the company,

• (b) an employee of the company and any other natural person whose services are placed at the disposal and under the control of the company and who is involved in the provision by the company of collective portfolio management, or

• (c) a natural person who is directly involved in the provision of services to the company under a delegation arrangement to third parties for the purpose of the provision by the company of collective portfolio management;

“repurchase” means the purchase of units from a holder by a management company or investment company;

“senior management”, in relation to a management company, means the person or persons who effectively conduct the business of the company in accordance with Regulation 17(1)(c);

“shares” has the meaning assigned to it by paragraph (a) of the definition in this Regulation of “transferable securities”;

“sub-fund” means a separate portfolio of assets maintained by a UCITS in accordance with its trust deed, deed of constitution or articles;

“subsidiary” means a subsidiary undertaking within the meaning of Regulation 4 of the European Communities (Companies Group Accounts) Regulations 1992 ( S.I. No. 201 of 1992 );

“supervisory function”, in relation to a management company, means the relevant persons or body or bodies responsible for the supervision of the company’s senior management and for the assessment and periodical review of the adequacy and effectiveness of the risk management process and of the policies, arrangements and procedures put in place to comply with the company’s obligations under these Regulations;

“synthetic risk and reward indicators” means synthetic indicators within the meaning of Article 8 of the KII Regulation;

“third country” means a country that is not a Member State, and includes a state, province, region or dependent territory of such a country;

“transferable securities” means—

• (a) shares in companies and other securities equivalent to shares in companies (in these Regulations referred to as “shares”) and which fulfil the criteria specified in Part 1 of Schedule 2 applicable to them,

• (b) bonds and other forms of securitised debt (in these Regulations referred to as “debt securities”) and which fulfil the criteria specified in Part 1 of Schedule 2 applicable to them,

• (c) other negotiable securities which carry the right to acquire any securities which fall within paragraph (a) or (b) by subscription or exchange and which fulfil the criteria specified in Part 1 of Schedule 2 applicable to them, or

• (d) securities specified for the purposes of this paragraph in Part 2 of Schedule 2,

other than the techniques and instruments referred to in Regulation 69(2)(a);

“trustee”, in relation to a UCITS, means an institution referred to as a depositary in the Directive;

“UCITS home Member State” means the Member State in which the UCITS is authorised;

“UCITS host Member State” means a Member State, other than the UCITS home Member State, in which the units of the UCITS are marketed;

“umbrella fund” means, subject to paragraph (7), a UCITS which is divided into 2 or more sub-funds;

“undertaking for collective investment in transferable securities” or “UCITS” has the meaning assigned to it by Regulation 4(3);

“unit” includes a share and any other instrument granting an entitlement to share in the investments or relevant income of a collective investment undertaking, and whether or not the undertaking is a UCITS to which these Regulations apply;

“unit-holder” means a natural or legal person holding one or more units in a UCITS;

“unit trust” means a collective investment undertaking constituted as a trust under which the property concerned is held on trust for the participants;

“usual time limits” means those time limits which are acceptable market practice in the context of a particular transaction.

• (2) For the purposes of these Regulations, all the places of business set up in the same Member State by a management company with its headquarters in another Member State shall be regarded as a single branch of the company.

• (3) For the purposes of paragraph (b) of the definition in paragraph (1) of “close links”—

• (a) a subsidiary undertaking of a subsidiary undertaking shall also be considered to be a subsidiary of the parent undertaking which is at the head of those undertakings, and

• (b) situations in which 2 or more natural or legal persons are permanently linked to the same person by a control relationship shall also be regarded as constituting a close links between such persons.

• (4) Schedule 3 shall apply to the interpretation of references in these Regulations to money market instruments.

• (5) Articles 13 to 16 of Directive 2006/49/EC of 14 June 2006⁸ on the capital adequacy of investment firms and credit institutions (recast) shall, with all necessary modifications, apply to the definition in paragraph (1) of “own funds”.

(6)(a) For the purposes of the definition in paragraph (1) of “qualifying holding”, the voting rights referred to in Article 7 of Directive 88/627/EEC of 12 December 1988⁹ on the information to be published when a major holding in a listed company is acquired or disposed of shall be taken into account.

• (b) For the purposes of subparagraph (a), the voting rights referred to in Articles 9 and 10 of Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004¹⁰ on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC shall be taken into account.

• (7) Part 8 shall apply to each sub-fund of an umbrella fund as if the sub-fund were a separate UCITS.

• (8) Unless the contrary intention appears—

• (a) a word or expression used in these Regulations and also in the Directive has in these Regulations the same meaning as it has in the Directive, and

• (b) a reference to any other enactment, EC Directive or Regulation shall be construed as a reference to the enactment, EC Directive or Regulation, as the case may be, as amended by any other enactment, EC Directive or Regulation.

PART 2 Scope

Scope

• (2) Subject to paragraph (9), Part 12 applies to UCITS authorised in another Member State which proposes to market units in the State.

• (3) Subject to paragraph (9), for the purposes of these Regulations, UCITS are undertakings—

• (a) the sole object of which is the collective investment in either or both—

• (i) transferable securities,

• (ii) other liquid financial assets referred to in Regulation 68,

of capital raised from the public and which operate on the principle of risk-spreading,

and

• (b) the units of which are, at the request of holders, repurchased or redeemed, directly or indirectly, out of those undertakings’ assets.

• (4) Action taken by a UCITS to ensure that the stock exchange value of its units does not vary significantly from their net asset value shall be regarded as equivalent to repurchase or redemption referred to in paragraph (3)(b).

• (5) UCITS may consist of several sub-funds.

• (6) UCITS may be constituted as—

• (a) unit trusts,

• (b) investment companies with fixed capital that are registered as public limited companies,

• (c) investment companies with variable capital that are registered as public limited companies and the articles of which provide that—

• (i) the amount of the paid-up share capital of the investment company concerned shall at all times be equal to the net asset value of the company, and

• (ii) the shares of the investment company concerned shall have no par value,

or

• (d) common contractual funds.

• (7) A UCITS to which these Regulations apply shall not convert itself into a collective investment undertaking which would not be subject to the Directive and any such purported conversion shall be void.

• (8) Without prejudice to Part 7, a UCITS to which these Regulations apply and which proposes to convert itself into a collective investment undertaking to which these Regulations apply shall comply with such conditions as the Bank may consider prudent to specify in relation to the conversion, for the purposes and in the interest of the orderly and proper regulation of UCITS in accordance with these Regulations.

• (9) These Regulations do not apply to—

• (a) investment companies the assets of which are invested through the intermediary of subsidiary companies wholly or mainly otherwise than in transferable securities,

• (b) collective investment undertakings of the closed-ended type,

• (c) collective investment undertakings which raise capital without promoting the sale of their units to the public within the Community or any part of it, and

• (d) collective investment undertakings the units of which, under the fund rules or the instruments of incorporation of the investment company concerned, may be sold only to the public in third countries.

Restriction of Unit Trusts Act 1990

UCITS established in the State

PART 3 Authorisation of UCITS

Prohibition on UCITS carrying on activities in the State without authorisation

• (2) A UCITS which is established in another Member State and which has received authorisation from the competent authority in that State pursuant to the Directive may market its units in the State provided it complies with the requirements of Part 12.

Requirements for authorising unit trust, common contractual fund or investment company

• (a) has approved the application of the management company to manage the unit trust or common contractual fund,

• (b) has approved the trust deed or deed of constitution, and

• (c) has approved the choice of trustee.

• (2) An investment company shall be authorised only if the Bank—

• (a) has approved its articles,

• (b) has approved the choice of trustee,

• (c) where relevant, has approved the application of the designated management company to manage it, and

• (d) is satisfied that it complies with the requirements of Part 6.

Application of management company not established in the State

Circumstances in which Bank shall not authorise UCITS

• (2) The Bank shall not authorise a UCITS if any of the directors of the trustee are not of sufficiently good repute or are not sufficiently experienced.

• (3) For the purposes of paragraph (2), a trustee shall forthwith communicate to the Bank the names of the directors of the trustee and of every person succeeding them in office.

• (4) The Bank shall not authorise a UCITS if it is legally prevented from marketing its units in the State, including through a provision in the trust deed, deed of constitution or articles.

Time limit within which Bank shall inform management or investment company whether or not it is authorised

Approval of Bank necessary for subsequent changes

Applications for authorisation

Bank shall make law, etc. on UCITS accessible

• (2) The Bank shall ensure that such information is available in the English language in a clear and unambiguous manner and kept up to date.

PART 4 Obligations regarding Management Companies

Chapter 1 Conditions for taking up business

Authorisation of management company

Activities of management company

• (b) The activity of the management of unit trusts, common contractual funds and investment companies includes, but is not limited to, the activities specified in Schedule 1.

(2)(a) Subject to subparagraph (b), a management company may be authorised to provide, as well as the management of collective investment undertakings, the following additional services:

• (i) the management of portfolios of investments, including those owned by pension funds, in accordance with mandates given by investors on a discretionary, client-by-client basis, where such portfolios include one or more of the investment instruments listed in Section C of the Annex to the MIFID;

• (ii) as non-core services:

• (I) investment advice concerning one or more of the instruments listed in Annex I, Section C to Directive 2004/39/EC;

• (II) the safekeeping and administration in relation to units of collective investment undertakings.

• (b) A management company shall not be authorised—

• (i) to provide only the services referred to in clauses (i) and (ii) of subparagraph (a), or

• (ii) to provide the non-core services referred to in clause (ii) of subparagraph (a) without being authorised to provide the services referred to in clause (i) of subparagraph (a).

• (3) The definition in Regulation 3(1) of “management company”, and Regulations 32, 33, 76 and 99 to 102 of the MIFID Regulations, shall, with all necessary modifications, apply to the provision of the services referred to in clauses (i) and (ii) of subparagraph (a) of paragraph (2) by a management company.

• (4) A management company which provides individual portfolio management services shall comply with the client asset requirements issued by the Bank under the MIFID Regulations.

• (5) As part of the provision of collective portfolio management services, a management company authorised pursuant to these Regulations may maintain client asset accounts for processing subscription and salespersons moneys. In such case, the management company shall comply with the client asset requirements issued by the Bank under the MIFID Regulations, as applicable and subject to any conditions which may be imposed by the Bank pursuant to Regulation 123.

Conditions for authorisation of management company and grounds for withdrawal of authorisation

• (a) it is a body corporate with its registered office and head office in the State,

• (b) it has an initial capital of at least €125,000, and

• (c) the persons who effectively conduct the business of the management company are of sufficiently good repute and are sufficiently experienced in relation to the type of UCITS to be managed by the management company.

(2)(a) Where close links exist between a management company and other natural or legal persons, the Bank shall grant authorisation only if those links do not prevent the effective exercise of its supervisory functions.

• (b) The Bank shall refuse authorisation if the laws, regulations or administrative provisions of a third country governing one or more natural or legal persons with whom a management company has close links, or difficulties involved in their enforcement, prevent the effective exercise of the Bank’s supervisory functions.

• (c) The Bank shall require a management company to provide it with the information the Bank requires to monitor compliance with the conditions referred to in this paragraph on a continuous basis.

• (3) The conduct of a management company’s business shall be decided by at least 2 persons meeting the conditions specified in paragraph (1)(c).

• (4) Subject to paragraphs (5) to (7), when the net asset value of the portfolios of the management company exceeds €250,000,000, the company shall provide an additional amount of own funds which shall be equal to 0.02% of the amount by which the value of the portfolios of the company exceeds €250,000,000.

• (5) The total of the initial capital and the additional amount required to be held pursuant to paragraph (4) by a management company shall not be required to exceed €10,000,000.

• (6) The own funds of the management company shall never be less than the amount prescribed by the Bank in accordance with the terms of Directive 2006/49/EC.

(7)(a) A management company need not provide up to 50% of the additional amount of own funds referred to in paragraph (4) if it benefits from a guarantee of the same amount given by a credit institution or an insurance undertaking.

• (b) Such credit institution or insurance undertaking shall have its registered office in a Member State but may have its registered office in a third country provided that such institution or undertaking is subject to prudential rules considered by the Bank to be equivalent to those laid down in Community law.

• (8) For the purpose of paragraph (4), the following portfolios shall be deemed to be the portfolios of the management company:

• (a) unit trusts and common contractual funds, managed by the company, including portfolios for which it has delegated the management function but excluding portfolios that it is managing under delegation;

• (b) investment companies for which the company is the designated management company; and

• (c) other collective investment undertakings managed by the company including portfolios for which it has delegated the management function but excluding portfolios that it is managing under delegation.

• (9) For the purposes of paragraph (1)(c), a management company shall forthwith communicate to the Bank the names of the persons who effectively conduct the business of the company and of every person succeeding them in office.

• (10) A management company may start business as soon as authorisation has been granted.

• (11) The Bank shall inform a proposed management company within 6 months of the date of receipt of a complete application whether or not authorisation has been granted. Reasons shall be given where an authorisation is refused.

• (12) A proposed management company which has been refused authorisation may apply to the court in accordance with Regulation 135.

• (13) A proposed management company shall have the same right to apply to the court as in paragraph (12) where the Bank fails to take a decision on authorisation within the time prescribed in paragraph (11).

• (14) The Bank may withdraw the authorisation issued to a management company only where the company—

• (a) does not make use of the authorisation within 12 months, expressly renounces the authorisation or has ceased the activity covered by these Regulations for more than the previous 6 months, unless the Bank has provided for the authorisation to lapse automatically in such cases,

• (b) has obtained the authorisation by making false statements or by any other irregular means,

• (c) no longer fulfils the conditions under which authorisation was granted,

• (d) no longer complies with Directive 2006/49/EC if its authorisation also covers the discretionary portfolio management service referred to in Regulation 16(2)(a)(i), or

• (e) has seriously or systematically infringed the rules or requirements of the Bank imposed pursuant to these Regulations.

Application for authorisation

• (a) the type of business to be carried on or likely to be carried on by the company,

• (b) any person or persons having a qualifying shareholding in, or having ownership of, the company, and

• (c) the memorandum of association and articles of association of the company.

• (2) A proposed management company shall not be authorised by the Bank unless it satisfies the Bank—

• (a) that the company has made arrangements to ensure that its activities will be carried out in such a manner that the requirements of these Regulations are complied with,

• (b) that, where applicable, the memorandum of association and articles of association of the company contain sufficient provision so as to enable it to operate in accordance with these Regulations, and in accordance with any condition or requirement, or both, as the Bank may impose,

• (c) it has the minimum level of capital which shall be specified by the Bank,

• (d) as to the probity and competence of each of its directors and managers,

• (e) as to the suitability of each of its qualifying shareholders,

• (f) as to the organisational structure and management skills of the company and that adequate levels of staff and expertise will be employed to carry out its proposed activities,

• (g) that it has and will follow established procedures to enable the Bank to be supplied with all information necessary for the Bank to carry out its supervisory functions and to enable the public to be supplied with any information which the Bank may specify,

• (h) that the organisation of its business structure is such that it and any of its associated or related undertakings, where appropriate and practicable, are capable of being supervised adequately by the Bank, and

• (i) as to its conduct of business, its financial resources and any other matters as the Bank considers necessary in the interests of the proper and orderly regulation and supervision of authorised management companies or in the interests of the protection of investors.

• (3) The Bank may impose conditions or requirements, from time to time, in respect of the level of capital to be maintained by an authorised management company and shall have regard to the capital requirements set out in these Regulations and the MIFID Regulations.

• (4) The Bank may require that an appointment as a director of an authorised management company or proposed management company or to the post of chief executive or manager or post equivalent thereto, on or after the granting of an authorisation under these Regulations, shall be subject to the prior approval in writing of the Bank. Such approval shall not be given unless the authorised management company or proposed management company satisfies the Bank as to the probity and competence of the proposed appointee.

• (5) The Bank may direct an authorised management company to alter its memorandum or articles of association in the interest of the proper and orderly regulation and supervision of management companies, or the protection of investors, or both.

• (6) An authorisation granted by the Bank under these Regulations shall specify the classes of services which may be provided by an authorised management company.

(7)(a) The Bank may authorise in writing such and so many persons to be authorised officers for the purposes of these Regulations and may revoke such authorisations.

• (b) The Bank may at any time prior to the grant or refusal of an authorisation request further information from the proposed management company or may instruct an authorised officer to make such inquiries or carry out such investigations as may be necessary for the purpose of evaluating properly an application under these Regulations and such inquiries or investigations shall be carried out in accordance with these Regulations.

• (8) The Bank shall consult the competent authority of the other Member State involved before authorising a proposed management company which is—

• (a) a subsidiary of another management company, an investment firm, a credit institution or an insurance undertaking authorised in another Member State,

• (b) a subsidiary of the parent undertaking of another management company, an investment firm, a credit institution or an insurance undertaking authorised in another Member State, or

• (c) controlled by the same natural or legal persons as control another management company, an investment firm, a credit institution or an insurance undertaking authorised in another Member State.

(9)(a) In the case of a management company, the Bank shall apply these Regulations, having regard to the division of responsibilities between the management company’s home Member State and the management company’s host Member State, which are set out in the Directive, and the relevant provisions of these Regulations shall be construed accordingly.

• (b) Subject to these Regulations, a management company shall comply with such conditions or requirements, or both, as may be imposed on it by the Bank in the interests of any or all of the following:

• (i) the proper and orderly regulation and supervision of a management company;

• (ii) the protection of investors or clients or both.

• (10) The Bank may impose requirements on a proposed management company or an authorised management company to organise its business or corporate structure or control of any associated undertaking or related undertaking not supervised by the Bank such that the management company when authorised under these Regulations and, where appropriate and practicable, the business of any associated undertaking or related undertaking, either collectively or individually, is capable of being supervised to the satisfaction of the Bank under these Regulations.

Chapter 2 Relations with third countries

Relations with third countries

• (2) The Bank shall cooperate with the Commission on matters relating to third countries pertaining to the Directive.

Chapter 3 Operating conditions

Duty of Bank to ensure that management companies comply with Regulations 16 and 17

(2)(a) The own funds of a management company may not fall below the level required by Regulation 17.

• (b) Where they do, however, the Bank may, where the circumstances justify it, allow such management company a limited time period in which to rectify the situation or cease its activities.

Qualifying holdings

• (2) The relevant provisions shall, with all necessary modifications, apply to qualifying holdings in management companies as they apply to acquiring transactions in investment firms within the meaning of the MIFID Regulations.

• (3) Part 15 of the MIFID Regulations shall, to the extent that it relates to the relevant provisions applied as specified in paragraph (2), apply, with all necessary modifications, to the relevant provisions as so applied.

• (4) Part 16 of the MIFID Regulations shall, with all necessary modifications, to the extent that it relates to the relevant provisions applied as specified in paragraph (2), apply, with all necessary modifications, to the relevant provisions as so applied.

• (5) For the purposes of this Regulation—

• (a) the expressions “firm/investment firm” and “investment firms” contained in Article 10 of the MIFID, any of the relevant provisions, or Part 15 or 16 of the MIFID Regulations, shall be construed as “management company” and “management companies” respectively, and

• (b) the term “the relevant provisions” means—

• (i) Regulations 13 and 30 of the MIFID Regulations, and

• (ii) Part 14 of the MIFID Regulations.

Prudential rules

• (2) In particular, the Bank having regard also to the nature of the UCITS managed by a management company, shall require that each such company—

• (a) has sound administrative and accounting procedures, control and safeguard arrangements for electronic data processing and adequate internal control mechanisms including, in particular, rules for personal transactions by its employees or for the holding or management of investments in financial instruments in order to invest on its own funds and ensuring, inter alia, that each transaction involving the fund may be reconstructed according to its origin, the parties to it, its nature, and the time and place at which it was effected and that the assets of the unit trusts, common contractual funds or of the investment companies managed by the management company are invested according to the fund rules or the instruments of incorporation and the legal provisions in force, and

• (b) is structured and organised in such a way as to minimise the risk of UCITS’ or clients’ interests being prejudiced by conflicts of interest between the company and its clients, between one of its clients and another, between one of its clients and a UCITS or between 2 UCITS.

• (3) Each management company the authorisation of which also covers the discretionary portfolio management service referred to in Regulation 16(2)(a)(i)—

• (a) shall not invest all or a part of an investors portfolio in units of unit trusts, common contractual funds or of investment companies it manages, unless it receives prior general approval from the client, and

• (b) shall be subject with regard to the services referred to in clauses (i) and (ii) of subparagraph (a) of Regulation 16(2) to the provisions laid down in Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997¹¹ on investor-compensation schemes and comply with the Investor Compensation Act 1998 (No. 37 of 1998).

• (4) The requirements specified in Schedule 4 shall have effect for the purposes of this Regulation.

Delegations

• (a) the management company has informed the Bank in an appropriate manner (whereupon the Bank shall, without delay, transmit the information to the competent authority of the home Member State of a UCITS managed by that management company),

• (b) the delegation mandate does not prevent the effectiveness of supervision over the management company, and in particular it shall not prevent the management company from acting, or the UCITS from being managed, in the best interests of its investors,

• (c) when the delegation concerns investment management, the mandate is only given to undertakings which are authorised or registered for the purpose of asset management and subject to prudential supervision; the delegation shall be in accordance with investment-allocation criteria periodically laid down by a management company,

• (d) where the mandate concerns investment management and is given to a third country undertaking, cooperation between the Bank and the supervisory authorities of the third country concerned is ensured,

• (e) a mandate with regard to the core function of investment management is not given to the trustee or to any other undertaking whose interests may conflict with those of the management company or the unit-holders,

• (f) measures are put in place which enable the persons who conduct the business of the management company to monitor effectively at any time the activity of the undertaking to which the mandate is given,

• (g) the mandate does not prevent the persons who conduct the business of the management company either from giving at any time further instructions to the undertaking to which functions are delegated or from withdrawing the mandate or both with immediate effect when this is in the interest of investors,

• (h) having regard to the nature of the functions to be delegated, the undertaking to which functions will be delegated is qualified and capable of undertaking the functions in question, and

• (i) the prospectuses issued by a UCITS list the functions which a management company has been permitted to delegate in accordance with this Regulation.

• (2) Neither the management companys nor the trustee’s liability shall be affected by the fact that the management company delegated any functions to third parties, nor shall the management company delegate its functions to the extent that it becomes a letterbox entity.

Rules of conduct

• (a) acts honestly and fairly in conducting its business activities in the best interests of the UCITS it manages and the integrity of the market,

• (b) acts with due skill, care and diligence, in the best interests of the UCITS it manages and the integrity of the market,

• (c) has and employs effectively the resources and procedures that are necessary for the proper performance of its business activities,

• (d) tries to avoid conflicts of interest and, when they cannot be avoided, ensures that the UCITS it manages are fairly treated, and

• (e) complies with all regulatory requirements applicable to the conduct of its business activities so as to promote the best interests of its investors and the integrity of the market.

• (2) The requirements specified in Schedule 5 shall have effect for the purposes of this Regulation.

Investor complaints

• (b) Management companies shall also establish appropriate procedures and arrangements to make information available at the request of the public or the Bank.

• (2) Management companies shall ensure that each complaint and the measures taken for its resolution are recorded.

• (3) Management companies shall ensure that investors shall be able to file complaints free of charge. The information regarding procedures referred to in paragraph (1) shall be made available to investors free of charge.

Chapter 2 Freedom of establishment and freedom to provide services

Establishment of branch and provision of services

• (2) Where a management company so authorised proposes, without establishing a branch, only to market the units of the UCITS it manages as provided for in Schedule 1 in the State, without proposing to pursue any other activities or services, such marketing shall be subject only to the requirements of Part 12.

• (3) The establishment of a branch or the provision of the services shall not be subject to any authorisation requirement, to any requirement to provide endowment capital or to any other measure having equivalent effect.

• (4) Subject to the conditions set out in these Regulations, a UCITS shall be free to designate, or to be managed by a management company authorised in a Member State other than the State, provided that such a management company complies with—

• (a) Regulation 27 or 28, and

• (b) Regulations 29 to 30.

Establishment of branch in another Member State

• (a) the Member State within the territory of which the management company plans to establish a branch;

• (b) a programme of operations setting out the activities and services envisaged and the proposed organisational structure of the branch;

• (c) a description of the risk management process put in place by the management company, including a description of the procedures and arrangements taken in accordance with Regulation 25;

• (d) the address of the management company in the management company’s host Member State from which documents may be obtained; and

• (e) the names of those responsible for the management of the branch.

(2)(a) Unless the Bank has reason to doubt the adequacy of the administrative structure or the financial situation of a management company, taking into account the activities envisaged, it shall, within 2 months of receiving all the information referred to in paragraph (1), communicate that information to the competent authority of the host Member State and shall inform the management company accordingly.

• (b) The Bank shall also communicate to the competent authority of the host Member State details of any compensation scheme intended to protect investors.

• (c) Where the Bank refuses to communicate the information referred to in paragraph (1) to the competent authority of the management company’s host Member State, the Bank shall give reasons for its refusal to the management company concerned within 2 months of receiving all the information. The Bank’s refusal or their failure to reply shall be subject to the right to apply to the court as provided for in Regulation 135.

• (3) Where a management company wishes to pursue the activity of collective portfolio management referred to in Schedule 1, the Bank shall enclose with the documentation sent to the competent authority of the management company’s host Member State an attestation that the management company has been authorised pursuant to these Regulations, a description of the scope of the management company’s authorisation and details of any restriction on the types of UCITS that the management company is authorised to manage.

• (4) A management company, authorised under these Regulations, which pursues activities by a branch within the territory of the management company’s host Member State shall comply with the rules drawn up by the management company’s host Member State pursuant to Regulation 24.

• (5) The competent authority of the management company’s host Member State shall be responsible for supervising compliance with paragraph (4).

• (6) Before the branch of a management company authorised in another Member State starts business within the State, the Bank, acting as the competent authority of the management company’s host Member State, shall within 2 months of receiving the information referred to in paragraph (1), prepare for supervising the compliance of the management company with the rules under its responsibility.

• (7) On receipt of a communication from the Bank or on the expiry of the 2 month period provided for in paragraph (6) without receipt of any communication from the Bank, the branch may be established and start business.

• (8) In the event of a change in any particulars communicated in accordance with paragraph (1)(b), (c), (d) or (e), a management company shall give notice in writing of the change to the Bank and the competent authority of the management company’s host Member State at least one month before implementing the change so that the Bank, acting as either the competent authority of the management company’s home Member State or management company’s host Member State, may take a decision on the change under paragraph (2) or (6), as the case may be.

• (9) In the event of a change in the particulars communicated in accordance with paragraph (2)(a) and (b), the Bank shall inform the competent authority of the management company’s host Member State accordingly.

• (10) The Bank shall update the information contained in the attestation referred to in paragraph (3) and inform the competent authority of the management company’s host Member State whenever there is a change in the scope of the management company’s authorisation or in the details of any restriction on the types of UCITS that the management company is authorised to manage.

Provision of information

• (a) the Member State within the territory of which the management company intends to operate; and

• (b) a programme of operations stating the activities and services it will undertake, including a description of the risk management process put in place by the management company and a description of the procedures and arrangements taken in accordance with Regulation 24.

(2)(a) The Bank shall, within one month of receiving the information referred to in paragraph (1), forward it to the competent authority of the management company’s host Member State.

• (b) The Bank shall also communicate details of any applicable compensation scheme intended to protect investors.

• (c) Where a management company wishes to pursue the activity of collective portfolio management as referred to in Schedule 1, the Bank shall enclose with the documentation sent to the competent authority of the management company’s host Member State an attestation that the management company has been authorised pursuant to these Regulations, a description of the scope of the management company’s authorisation and details of any restriction on the types of UCITS that the management company is authorised to manage.

• (d) The management company may then start business in the host Member State in accordance with the Directive.

• (3) A management company, authorised under these Regulations, which pursues activities under the freedom to provide services shall comply with the rules drawn up by the Bank pursuant to Regulation 24.

• (4) Where the content of the information communicated in accordance with paragraph (1)(b) is amended, the management company shall give notice in writing of the amendment to the Bank and to the management company’s host Member State before implementing the change. The Bank shall update the information contained in the attestation referred to in paragraph (2) and inform the competent authority of the management company’s host Member State whenever there is a change in the scope of the management company’s authorisation or in the details of any restriction on the types of UCITS that the management company is authorised to manage.

Compliance with rules which relate to constitution and functioning of UCITS, etc

• (2) The Bank shall ensure that a management company authorised by it is not subject to any additional requirements established in the UCITS home Member State in respect of the subject matter of these Regulations and the Directive, except in the cases expressly referred to in these Regulations and the Directive.

Provision of documentation to competent authority

• (i) the agreement in writing with the trustee referred to in Regulations 35(6) and 51(3); and