S.I. No. 257/2013 - European Union (Alternative Investment Fund Managers) Regulations 2013

• (2) Part 2 of Schedule 2 to the Central Bank Act 1942 is amended by inserting the following after item 52:

“

53	S.I. No. 257 of 2013	European Union (Alternative Investment Fund Managers) Regulations 2013	The whole instrument

”.

Amendments of Unit Trusts Act 1990.

• (2) Section 4(1) of the Act of 1990 is amended by substituting the following for paragraphs (a) to (c):

• “(a) where the management company under the scheme is not authorised by the Bank under Part 2 of the European Union (Alternative Investment Fund Managers) Regulations 2013 or by the competent authority in its home Member State in accordance with Chapter II of Directive 2011/61/EC of the European Parliament and of the Council of 8 June 2011 or in its Member State of reference in accordance with that Chapter II:

  • (i) the Bank is satisfied that the competence of the management company in respect of matters of the kind with which it would be concerned in relation to a unit trust scheme and its probity are such as to render it suitable to act as management company under the scheme, and

  • (ii) the management company under the scheme is a body corporate that is incorporated under the law of the State and has, in the opinion of the Bank, sufficient financial resources at its disposal to enable it to conduct its business effectively and meet its liabilities,

• (b) the management company will be in a position to comply with any conditions imposed by the Bank under section 5,

• (c) the trustee under the scheme is a depositary as specified in Regulation 22 (3) of the European Union (Alternative Investment Fund Managers) Regulations 2013 and will be in a position to comply with any conditions imposed by the Bank under section 5,”.

• (3) Sections 9 and 10 of the Act of 1990 are repealed.

• (4) Section 11 of the Act of 1990 is amended by inserting the following after subsection (1):

• “(1A) The assets of a unit trust scheme shall be entrusted to a trustee for safe-keeping in accordance with the conditions imposed by the Bank under section 5 and, subject to such transitional arrangements as may be specified by the Bank, in accordance with the provisions of Regulation 22(8) of the European Union (Alternative Investment Fund Managers) Regulations 2013.”.

• (5) Section 14(1) of the Act of 1990 is amended by substituting “Where the authorised unit trust scheme does not have an alternative investment fund manager which is authorised in accordance with Chapter II of Directive 2011/61/EC of the European Parliament and of the Council of 8 June 2011 or where its trustee is not otherwise subject to Articles 21(12) to (15) of that Directive, any provision in the trust deed of an authorised unit trust scheme shall be void” for “Any provision in thetrust deedof anauthorised unit trust schemeshall be void”.

Amendments of Companies Act 1990.

• “(3) For the avoidance of doubt, a reference in this Part to a trustee shall be construed as a reference to a depositary for the purposes of the European Union (Alternative Investment Fund Managers) Regulations 2013.”.

• (2) Section 256(8) of the Companies Act 1990 is repealed.

Amendments of Investment Funds, Companies and Miscellaneous Provisions Act 2005.

• (2) Section 8(1) of the Act of 2005 is amended by substituting the following for paragraphs (a) to (d):

• “(a) either—

  • (i) the management company is authorised by the Bank under Part 2 of the European Union (Alternative Investment Fund Managers) Regulations 2013 or by the competent authority in its home Member State in accordance with Chapter II of Directive 2011/61/EC of the European Parliament and of the Council of 8 June 2011 or in its Member State of reference in accordance with that Chapter II, or

  • (ii) the Bank is satisfied that the competence of the management company in respect of matters of the kind with which it would be concerned in relation to a common contractual fund and its probity are such as to render it suitable to act as management company under the common contractual fund,

• (b) save where it is authorised as mentioned in paragraph (a)(i), the management company of the common contractual fund is a body corporate that has its registered office and head office in the State, and has, in the opinion of the Bank, sufficient financial resources at its disposal to enable it to conduct its business effectively and meet its liabilities,

• (c) the custodian of the common contractual fund is a depositary as specified in Regulation 22(3) of the European Union (Alternative Investment Fund Managers) Regulations 2013,

• (d) the Bank is satisfied that the common contractual fund is organised such that the effective control over the affairs of the management company and of the custodian of the common contractual fund will be exercised independently of one another,”.

• (3) Section 16(1) of the Act of 2005 is amended by inserting the following at the end thereof:

“and, subject to such transitional arrangements as may be specified by the Bank, in accordance with the provisions of Regulation 22(8) of the European Union (Alternative Investment Fund Managers) Regulations 2013”.

• (4) Section 17(1) of the Act of 2005 is amended by substituting“Where a common contractual fund does not have an alternative investment fund manager which is authorised in accordance with Chapter II of Directive 2011/61/EC of the European Parliament and of the Council of 8 June 2011 or is not otherwise subject to Articles 21(12) to (15) of that Directive, the custodian shall exercise due care and diligence” for “The custodian shall exercise due care and diligence”.

Amendments of Investment Limited Partnerships Act 1994.

• (2) The definition of “custodian” in section 3 of the Act of 1994 is amended by substituting “eligible to act as custodian in accordance with section 8 of this Act” for “approved by the Bank under section 8 of this Act”.

• (3) Paragraph (c) of section 5 of the Act of 1994 is amended—

• (a) by substituting “have appointed a custodian being a person maintaining a place of business in the State, and eligible to act as custodian in accordance with section 8 of this Act” for “have appointed a custodian or custodians being a person or persons maintaining a place of business in the State, and approved by the Bank under section 8 of this Act”; and

• (b) by inserting, at the end of that paragraph, “and in the European Union (Alternative Investment Fund Managers) Regulations 2013 where relevant”.

• (4) Section 8 of the Act of 1994 is amended by substituting the following for subsection (1):

• “(1) The Bank shall not authorise an investment limited partnership—

  • (a) unless either—

    • (i) the proposed general partners or any one of them under the partnership agreement is authorised by the Bank under Part 2 of the European Union (Alternative Investment Fund Managers) Regulations 2013 or by the competent authority in its home Member State in accordance with Chapter II of Directive 2011/61/EC of the European Parliament and of the Council of 8 June 2011 or in its Member State of reference in accordance with that Chapter II; or

    • (ii) the proposed general partners or any one of them under the partnership agreement satisfies the Bank as to their competence and probity,

  • (b) save where the proposed general partners or any one of them under the partnership agreement is or are authorised as mentioned in paragraph (a)(i) if, in the opinion of the Bank, they are not of sufficiently good repute or lack the experience required for the performance of their duties; and

  • (c) unless the proposed custodian is a depositary as specified in Regulation 22(3) of the European Union (Alternative Investment Fund Managers) Regulations 2013.”.

• (5) Section 11(3) of the Act of 1994 is amended by deleting “or additional custodians be appointed”.

• (6) The following section is substituted for section 24 of the Act of 1994:

“(1)(a) The custodian must enquire into the conduct of the general partners in the management of the investment limited partnership in each annual accounting period and report thereon to the limited partners.

• (b) The custodian’s report shall be delivered to the general partner in good time to enable it to include a copy of the report in the Annual Report required under section 16.

• (c) The custodian’s report shall state whether in the custodian’s opinion the general partner has managed the investment limited partnership in that period_

  • (i) in accordance with this Act or regulations made hereunder, directions of the Bank or the partnership agreement the limitations imposed on the investment and borrowing powers of the general partner and custodian by the partnership agreement or directions of the Bank, and

  • (ii) otherwise in accordance with the provisions of the partnership agreement and this Act,

  and, if it has not done so, in what respect in which it has not done so and the steps which the custodian has taken in respect thereof.

• (2) The custodian must carry out such additional duties as may be specified by the Bank by means of conditions imposed under section 7(2)(b).

• (3) Unless the general partners or any one of them under the partnership agreement is authorised by the Bank under Part 2 of the European Union (Alternative Investment Fund Managers) Regulations 2013 or by the competent authority in its home Member State in accordance with Chapter II of Directive 2011/61/EC of the European Parliament and of the Council of 8 June 2011 or in its Member State of reference in accordance with that Chapter II, the custodian must_

  • (a) carry out the instructions of the general partner unless they conflict with this Act or regulations made hereunder, directions of the Bank or the partnership agreement;

  • (b) ensure that in transactions involving investment limited partnership’s assets any consideration is remitted to it within the usual time limits;

  • (c) ensure that an investment limited partnership’s income is applied in accordance with this Act or regulations made hereunder, directions of the Bank or the partnership agreement;

  • (d) ensure that the value of the interests of the partners in the investment limited partnership is calculated in accordance with this Act and the partnership agreement;

  • (e) ensure that contributions and withdrawals of contributions of partners’ capital are effected in accordance with the partnership agreement and the Act.

• (4) Save where any of the general partners or any one of them is or are authorised as mentioned in subsection (3), any provision whether contained in the partnership agreement or in any contract with an investment limited partnership for exempting a custodian, general partner or auditor of an investment limited partnership from, or indemnifying him against any liability which would otherwise attach to him in respect of any negligence, default, breach of duty or breach of trust of which he may be guilty in relation to an investment limited partnership shall be void, so, however, that an investment limited partnership may indemnify any such custodian, general partner or auditor against any liability incurred by him in defending proceedings in which judgement is given in his favour or in which he is acquitted.

• (5) A custodian who fails to comply with subsection (1) or (2) or any of paragraphs (a) to (e) of subsection (3) shall be guilty of an offence and shall indemnify any person who thereby suffers loss.”.

SCHEDULE 1

• (a) portfolio management;

• (b) risk management.

• (a) Administration:

• (i) legal and fund management accounting services;

• (ii) customer inquiries;

• (iii) valuation and pricing, including tax returns;

• (iv) regulatory compliance monitoring;

• (v) maintenance of unit-/shareholder register;

• (vi) distribution of income;

• (vii) unit/shares issues and redemptions;

• (viii) contract settlements, including certificate dispatch;

• (ix) record keeping;

• (b) Marketing;

• (c) Activities related to the assets of alternative investment funds, namely services necessary to meet the fiduciary duties of the AIFM, facilities management, real estate administration activities, advice to undertakings on capital structure, industrial strategy and related matters, advice and services relating to mergers and the purchase of undertakings and other services connected to the management of the AIF and the companies and other assets in which it has invested.

SCHEDULE 2 Remuneration Policy

• (a) the remuneration policy is consistent with and promotes sound and effective risk management and does not encourage risk-taking which is inconsistent with the risk profiles, rules or instruments of incorporation of the alternative investment funds it manages;

• (b) the remuneration policy is in line with the business strategy, objectives, values and interests of the AIFM and the alternative investment funds it manages or the investors of such funds, and includes measures to avoid conflicts of interest;

• (c) the management body of the AIFM, in its supervisory function, adopts and periodically reviews the general principles of the remuneration policy and is responsible for its implementation;

• (d) the implementation of the remuneration policy is, at least annually, subject to central and independent internal review for compliance with policies and procedures for remuneration adopted by the management body in its supervisory function;

• (e) staff engaged in control functions are compensated in accordance with the achievement of the objectives linked to their functions, independent of the performance of the business areas they control;

• (f) the remuneration of the senior officers in the risk management and compliance functions is directly overseen by the remuneration committee;

• (g) where remuneration is performance related, the total amount of remuneration is based on a combination of the assessment of the performance of the individual and of the business unit or AIF concerned and of the overall results of the AIFM, and when assessing individual performance, financial as well as non-financial criteria are taken into account;

• (h) the assessment of performance is set in a multi-year framework appropriate to the life-cycle of the alternative investment funds managed by the AIFM in order to ensure that the assessment process is based on longer term performance and that the actual payment of performance-based components of remuneration is spread over a period which takes account of the redemption policy of the alternative investment funds it manages and their investment risks;

• (i) guaranteed variable remuneration is exceptional, occurs only in the context of hiring new staff and is limited to the first year;

• (j) fixed and variable components of total remuneration are appropriately balanced and the fixed component represents a sufficiently high proportion of the total remuneration to allow the operation of a fully flexible policy, on variable remuneration components, including the possibility to pay no variable remunerationcomponent;

• (k) payments related to the early termination of a contract reflect performance achieved over time and are designed in a way that does not reward failure;

• (l) the measurement of performance used to calculate variable remuneration components or pools of variable remuneration components includes a comprehensive adjustment mechanism to integrate all relevant types of current and future risks;

• (m) subject to the legal structure of the AIF and its rules or instruments of incorporation, a substantial portion, and in any event at least 50 per cent of any variable remuneration consists of units or shares of the AIF concerned, or equivalent ownership interests, or share-linked instruments or equivalent non-cash instruments, unless the management of alternative investment fund accounts for less than per cent of the total portfolio managed by the AIFM, in which case the minimum of 50 per cent does not apply.

The instruments referred to in this subparagraph shall be subject to an appropriate retention policy designed to align incentives with the interests of the AIFM and the alternative investment funds it manages and the investors of such funds. The Bank may place restrictions on the types and designs of those instruments or prohibit certain instruments as appropriate. This subparagraph shall be applied to both the portion of the variable remuneration component deferred in line with subparagraph (n) and the portion of the variable remuneration component not deferred;

• (n) at least 40 per cent, of the variable remuneration component is deferred over a period which is appropriate in view of the life cycle and redemption policy of the AIF concerned and is correctly aligned with the nature of the risks of the AIF in question.

The period referred to in this subparagraph shall be at least 3 to 5 years unless the life cycle of the AIF concerned is shorter; remuneration payable under deferral arrangements vests no faster than on a pro-rata basis; in the case of a variable remuneration component of a particularly high amount, at least 60 per cent of the amount is deferred;

• (o) the variable remuneration, including the deferred portion, is paid or vests only if it is sustainable according to the financial situation of the AIFM as a whole, and justified according to the performance of the business unit, the AIF and the individualconcerned.

The total variable remuneration shall generally be considerably contracted where subdued or negative financial performance of the AIFM or of the AIF concerned occurs, taking into account both current compensation and reductions in payouts of amounts previously earned, including through malus or clawback arrangements;

• (p) the pension policy is in line with the business strategy, objectives, values and long-term interests of the AIFM and the alternative investment funds it manages.

If the employee leaves the AIFM before retirement, discretionary pension benefits shall be held by the AIFM for a period of 5 years in the form of instruments defined in point (m). In the case of an employee reaching retirement, discretionary pension benefits shall be paid to the employee in the form of instruments defined in point (m), subject to a 5 year retention period;

• (q) staff are required to undertake not to use personal hedging strategies or remuneration- and liability-related insurance to undermine the risk alignment effects embedded in their remuneration arrangements;

• (r) variable remuneration is not paid through vehicles or methods that facilitate the avoidance of the requirements of these Regulations.

The remuneration committee shall be responsible for the preparation of decisions regarding remuneration, including those which have implications for the risk and risk management of the AIFM or the AIF concerned and which are to be taken by the management body in its supervisory function. The remuneration committee shall be chaired by a member of the management body who does not perform any executive functions in the AIFM concerned. The members of the remuneration committee shall be members of the management body who do not perform any executive functions in the AIFM concerned.

SCHEDULE 3 DOCUMENTATION AND INFORMATION TO BE PROVIDED IN CASE OF INTENDED MARKETING IN THE STATE BY IRISH AIFMS OR BY AIFMS WHOSE MEMBER STATE OF REFERENCE IS THE STATE

• (a) a notification letter, including a programme of operations identifying the alternative investment funds the AIFM intends to market and information on where those funds are established;

• (b) the AIF rules or instruments of incorporation;

• (c) identification of the depositary of the AIF;

• (d) a description of, or any information on, the AIF available to investors;

• (e) information on where the master AIF is established if the AIF is a feeder AIF;

• (f) any additional information referred to in Regulation 24(1) for each AIF the AIFM intends tomarket;

• (g) where relevant, information on the arrangements established to prevent units or shares of the AIF from being marketed to retail investors, including in the case where the AIFM relies on activities of independent entities to provide investment services in respect of the AIF.

SCHEDULE 4 DOCUMENTATION AND INFORMATION TO BE PROVIDED IN THE CASE OF INTENDED MARKETING IN OTHER MEMBER STATES BY IRISH AIFMS OR BY AIFMS WHOSE MEMBER STATE OF REFERENCE IS THE STATE

• (a) a notification letter, including a programme of operations identifying the alternative investment funds the AIFM intends to market and information on where those funds are established;

• (b) the AIF rules or instruments of incorporation;

• (c) identification of the depositary of the AIF;

• (d) a description of, or any information on, the AIF available to investors;

• (e) information on where the master AIF is established if the AIF is a feeder AIF;

• (f) any additional information referred to in Article 23(1) for each AIF the AIFM intends tomarket;

• (g) the indication of the Member State in which it intends to market the units or shares of the AIF to professional investors;

• (h) information about arrangements made for the marketing of alternative investment funds and, where relevant, information on the arrangements established to prevent units or shares of the AIF from being marketed to retail investors, including in the case where the AIFM relies on activities of independent entities to provide investment services in respect of the AIF.

GIVEN under my Official Seal,

16 July 2013.

MICHAEL NOONAN,

Minister for Finance.

Footnotes