S.I. No. 420/2015 - Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015

• (d) there is consistency in the valuation methodologies adopted throughout the various categories of assets.

Dealing

• (b) In this Regulation “forward prices” means the net asset value next computed after receipt of subscription or redemption requests.

• (2) A responsible person shall ensure that the frequency of valuation set out in the constitutional document of a UCITS is consistent with dealing arrangements.

Methods of valuation

• (2) Where a responsible person adjusts the value of an asset of a UCITS, the rationale for doing so must be documented clearly.

Responsibility for valuation policy

• (a) ensure that securities prices and currency rates used by a UCITS for valuation purposes are:

• (i) up-to-date; and

• (ii) provided by or obtained from a source that the responsible person considers to be reputable and reliable; and

• (b) keep the reliability of its sources of prices and rates under review.

• (2) A responsible person shall establish and maintain systems and procedures to enable the responsible person to, at least, do the following in respect of the relevant UCITS:

• (a) verify uncertain prices and rates;

• (b) ensure that investment restrictions are not breached;

• (c) ensure that dividends, expenses and taxes are accounted for properly;

• (d) provide movement thresholds at which price movements are reviewed;

• (e) query prices in which there appears to be little or no movement over time;

• (f) provide for the valuation policy in relation to unlisted or illiquid securities; and

• (g) provide for the valuation policy in relation to OTC derivatives.

• (3) A responsible person shall ensure that full and detailed records of the valuations of a UCITS are maintained to permit any valuation to be re-performed.

• (4) A responsible person shall ensure that reconciliation of cash, debtors and creditors of a UCITS takes place at the same frequency as the valuation.

Anti-dilution levy

• (a) in calculating the redemption price for the UCITS the responsible person may, on any dealing day on which there are net redemptions, adjust the redemption price by deducting an anti-dilution levy to cover dealing costs and to preserve the value of the underlying assets of the UCITS; and

• (b) in calculating the subscription price for the UCITS the responsible person may, on any dealing day on which there are net subscriptions, adjust the subscriptions price by adding an anti-dilution levy to cover dealing costs and to preserve the value of the underlying assets of the UCITS.

Chapter 9 Remuneration

Restriction on payment of certain fees

Chapter 10 Transactions involving Connected Persons

Interpretation: Chapter 10 of Part 2

Restrictions on transactions with connected persons

• (a) conducted at arm’s length; and

• (b) in the best interests of the unit-holders of the UCITS.

• (2) A responsible person may enter into a transaction, on behalf of a UCITS, with a connected person only if at least one of the conditions in paragraphs (a), (b) or (c) is complied with:

• (a) the value of the transaction is certified by either:

• (i) a person who has been approved by the depositary as being independent and competent; or

• (ii) a person who has been approved by the responsible person as being independent and competent in the case of transactions involving the depositary;

• (b) execution is on best terms on an organised investment exchange under the rules of the relevant exchange;

• (c) execution is on terms which the depositary or, in the case of a transaction involving the depositary, the responsible person is satisfied conform to the requirements set out in paragraph (1) above.

• (3) In the event of a transaction to which this Chapter applies:

• (a) the depositary or, in the case of a transaction involving the depositary, the responsible person shall document how it has complied with paragraph (2); and

• (b) where a transaction is conducted in accordance with subparagraph (c) of paragraph (2), the depositary or, in the case of a transaction involving the depositary, the responsible person shall document their rationale for being satisfied that the transaction conforms with the requirements set out in paragraph (1).

Chapter 11 Directed Brokerage Services

Rebates of commission

Costs, fees and expenses of directed brokerage services

• (2) The requirements for the purposes of paragraph (1) are that:

• (a) the costs, fees and expenses of the relevant directed brokerage service or similar arrangement:

• (i) are reasonable and vouched properly; and

• (ii) have been incurred directly by the operator in providing the relevant services or arrangement;

• (b) the prospectus disclosure required by Regulation 70 has been made;

• (c) the operator of the directed brokerage services or other arrangement invoices the responsible person separately for the relevant costs, fees and expenses.

PART 3 SUPERVISORY REQUIREMENTS

General conditions

• (b) An application to the Bank for approval for the purposes of subparagraph (a) shall include:

• (i) details of proposed sub-funds; and

• (ii) the proposed amendment or the proposed supplement (as the case may be) to the prospectus which will set out the investment objectives and policy of each of the proposed new sub-funds.

• (c) The responsible person of a UCITS shall ensure that the prospectus of the UCITS discloses:

• (i) a statement to the effect that relevant direct and indirect operational costs and fees, arising from efficient portfolio management techniques, may be deducted from the revenue delivered to the UCITS. These costs and fees should not include revenue;

• (ii) the identity of the entity to which the relevant direct and indirect operational costs and fees are paid; and

• (iii) if the entity to which the relevant direct and indirect operational costs and fees are paid is a related party to the management company or the depositary, that fact.

• (2) Subject to paragraph (4), a responsible person shall notify the Bank of each of the following, should it arise:

• (a) any proposal to amend the prospectus of the UCITS;

• (b) any proposal to amend any material agreement that has been entered into with a third party by or on behalf of a UCITS;

• (c) any proposal to replace a third party that has entered into a material agreement with the UCITS;

• (d) any proposal to change the auditor of the UCITS and the reasons for the proposed change.

• (3) A notification made for the purposes of paragraph (2) shall include sufficient information on the proposal to enable the Bank to consider and assess the proposal.

• (4) If the Bank objects to a proposal notified to the Bank pursuant to paragraph (2)(a), (b) or (c), it shall not be proceed.

Charges for redemption or repurchase of units

• (2) A responsible person shall:

• (a) provide unit-holders with reasonable notice of any proposed increase in the relevant fee; and

• (b) permit a unit-holder to redeem any or all of the unit-holder’s units prior to the implementation of the proposed increase.

• (3) In this Regulation, “relevant charge” means, in the context of a particular UCITS, a charge relating to the redemption or repurchase of units in that UCITS.

Replacement of depositary

• (2) Where a UCITS replaces its depositary, each of the retiring depositary and the new depositary shall notify the Bank as soon as practicable of whether that retiring depositary or new depositary (as the case may be) is satisfied or dissatisfied with the transfer of assets.

• (3) A responsible person may terminate the appointment of the depositary only:

• (a) upon the appointment of a new depositary; or

• (b) upon the revocation of the authorisation of the UCITS.

Replacement of Management company, general partner or third party

• (2) The procedures for the replacement of a management company or an administration company shall be approved by the board of the responsible person.

Monthly returns

• (2) The requirements for the purposes of paragraph (1) are:

• (a) returns shall be made on a monthly basis;

• (b) each return shall relate to a complete calendar month;

• (c) a return shall be made to the Bank not later than the tenth business day of the month that is subsequent to the month to which the return relates;

• (d) each return subsequent to the first return shall be in respect of the calendar month that is subsequent to the month to which the most recently submitted return relates;

• (e) a return must be denominated in the base currency of the relevant UCITS;

• (f) a return shall include:

• (i) the Bank code issued to the sub-fund of the UCITS;

• (ii) the base currency of the UCITS;

• (iii) the type of UCITS, designated by investment strategy;

• (iv) the total gross asset value of the UCITS at month-end;

• (v) the total net asset value of the UCITS at month-end;

• (vi) the number of units in circulation at month-end;

• (vii) the net asset value per unit at month-end;

• (viii) payments received from the issues of units during the relevant month;

• (ix) payments made for the repurchase of units during the relevant month;

• (x) the net amount from issues and repurchases during the relevant month;

• (xi) the profit or loss arising from the operations of the UCITS in the relevant month;

• (xii) investment management fees (excluding performance fees):

• (I) accrued, and

• (II) paid,

in the relevant month; and

• (xiii) all other charges, fees and expenses (excluding investment management fees):

• (I) accrued, and

• (II) paid,

in the relevant month.

Quarterly returns

• (2) The requirements for the purposes of paragraph (1) are:

• (a) each return shall be known as a Money-Market and Investment Fund return;

• (b) returns shall be made on a quarterly basis;

• (c) each return shall relate to a period of three complete and consecutive calendar months;

• (d) a return shall be made to the Bank not later than the tenth business day of the month that is subsequent to the last of the months to which the return relates; and

• (e) each return subsequent to the first return shall be in respect of the three-month period that is subsequent to the last of the months to which the most recently submitted return relates.

PART 4 PROSPECTUS REQUIREMENTS

General requirements

• (2) A responsible person shall translate a prospectus of a UCITS into another language only if such translation contains the same information and has the same meaning as in the prospectus that has been submitted to the Bank.

(3)(a) A responsible person shall not make any change to the investment objectives, or any material change to the investment policy, of a UCITS, each as disclosed in the prospectus, unless unit-holders have, in advance and on the basis of a simple majority of votes cast in general meeting or with the prior written approval of all unit-holders of the relevant UCITS (in accordance with the constitutional document) or such other majority as is specified in the constitutional document of the relevant UCITS, approved the relevant change or changes.

• (b) For the purposes of subparagraph (a), a change would be “material” if, were it to be made, it would alter significantly the asset type, credit quality, borrowing limits or risk profile of the relevant UCITS.

(4)(a) A responsible person shall provide all unit-holders of the UCITS with reasonable notice of the relevant change or changes in the event that, in accordance with paragraph (3), any change is made in the investment objectives or any material change is made in the investment policy

• (b) Notice given for the purposes of subparagraph (a) must be sufficient to enable a unit-holder, acting reasonably, to redeem some or all of the unit-holder’s units prior to the implementation of the relevant change or changes.

• (5) A responsible person shall, in the next-occurring periodic report, notify unit-holders of material changes to the content of the prospectus.

• (6) A responsible person shall ensure that the prospectus:

• (a) lists those stock exchanges, markets and regulated derivatives markets on which assets of the UCITS are listed or traded; and

• (b) includes only those stock exchanges, markets and regulated derivatives markets which, at the date of the prospectus, satisfy the regulatory criteria.

Advertising

• (2) A responsible person shall ensure that an advertisement relating to a UCITS shall not contain information which is false or misleading or presented in a manner that is deceptive.

• (3) A responsible person shall ensure that an advertisement relating to a UCITS shall refer to the key investor information document and the prospectus issued by the relevant UCITS.

• (4) A responsible person shall ensure that no advertisement relating to a UCITS is inconsistent with any relevant provision of the key investor information document or of the prospectus issued by the relevant UCITS.

• (5) Without prejudice to Regulation 94, a responsible person shall comply with the advertising standards set out in Schedule 6 where the relevant UCITS is:

• (a) authorised in a Member State other than the State and is marketing its units in the State, or

• (b) authorised in the State and is marketing its units in the State or in a state that does not have any statutory regulation of marketing.

Prospectus: general

• (a) the identity and, in brief form, details of the financial group or entity that is promoting the UCITS;

• (b) details of the persons who accept responsibility for information contained in the prospectus;

• (c) details of the principal investment manager of the UCITS;

• (d) details of sub-investment managers, if these are paid out of the assets of the UCITS directly and a statement that details of sub-investment managers not paid out of the assets of the UCITS directly, if any, shall be available on request to unit-holders;

• (e) if the UCITS proposes to create hedged currency share classes, that fact;

• (f) the distribution provisions on the termination or winding up of the UCITS, in particular those affecting unit-holders; and

• (g) details of the FDI exposures for the purposes of Regulation 15(4)(b)(iii).

Prospectus: investment policy

• (a) the types of asset in which the UCITS proposes to invest;

• (b) the basis upon which the UCITS will select its investments;

• (c) the place or places in which a UCITS will invest, indicating the countries or regions in which such investments will be made; and

• (d) whether it is intended to seek exposure to a country or region through investment in companies or instruments that are listed or traded on a stock exchange or market that is located in another jurisdiction.

• (2) A responsible person that proposes, on behalf of a UCITS, to take short positions shall, in the prospectus of the UCITS, disclose:

• (a) in relation to each of the categories of assets in which it may invest, whether the UCITS will take long positions or short positions or both; and

• (b) the percentage of the assets of the UCITS that it anticipates will be invested in long positions and in short positions respectively.

• (3) A responsible person shall ensure that a UCITS that uses FDI includes the following information in its prospectus:

• (a) a description of the types of FDI that the UCITS may use and the extent to which the UCITS may be leveraged; and

• (b) the method used to calculate global exposure.

• (4) A responsible person that uses, on behalf of a UCITS, the VaR approach shall, in the prospectus of the UCITS and in accordance with paragraph (5), disclose:

• (a) the expected level of leverage of the UCITS;

• (b) that there is a possibility of higher leverage levels; and

• (c) information on the reference portfolio.

• (5) For the purposes of paragraph (4):

• (a) leverage shall be calculated as the sum of the notionals of the derivatives that are used;

• (b) the calculation of leverage within subparagraph (a) may be supplemented with leverage calculated on the basis of a commitment approach; and

• (c) the creation of leveraged exposure to an index via FDI, or the inclusion of a leverage feature in an index, shall be taken into account in assessing compliance with the prospectus disclosure requirements of paragraph (4).

• (6) A responsible person that uses, on behalf of a UCITS, total return swaps, or other FDI with the same characteristics as a total return swap, shall include the following in the prospectus of the UCITS:

• (a) information on the underlying strategy or index and composition of the investment portfolio or index;

• (b) information on the counterparty to the transactions;

• (c) a description of the risk of counterparty default and the effect of any such default on investor returns;

• (d) details of the extent to which the counterparty assumes any discretion over the composition or management of the UCITS investment portfolio or over the underlying of the FDI; and

• (e) whether the approval of the counterparty is required in relation to any UCITS investment portfolio transaction.

• (7) If a counterparty has discretion over the composition or management of the UCITS investment portfolio or of the underlying of the FDI then the responsible person shall, in the prospectus of the UCITS, identify the counterparty as an investment manager.

Financial index

• (a) the market that the index is representing;

• (b) why the index is being used as part of the investment strategy of the UCITS;

• (c) whether the investment will be made directly, through investment in the constituents of the index, or indirectly, through an FDI; and

• (d) where additional information on the index may be obtained.

• (2) A responsible person that intends to make use, on behalf of a UCITS, of the increased diversification limits referred to in Regulation 71 of the UCITS Regulations, shall, in the prospectus of the relevant UCITS:

• (a) disclose the intention to make use of the increased diversification limits; and

• (b) provide a description of the exceptional market conditions that necessitate this investment.

• (3) A responsible person shall, in the prospectus of the relevant UCITS, disclose the rebalancing frequency of the financial index in which it invests and its effects on the costs within the index.

Structured UCITS

• (a) its investment policy;

• (b) the underlying exposure; and

• (c) payoff formulas.

Fund of funds

Index-tracking funds

• (a) a description of the index including information on the underlying components or details of where the exact composition of the index is published;

• (b) information on how the index will be tracked and the implications of the chosen method for unit-holders in terms of their exposure to the underlying index and counterparty risk;

• (c) information on the anticipated level of tracking error in normal market conditions; and

• (d) a description of factors that are likely to affect the ability of the UCITS to track the performance of the index, including transaction costs, small illiquid components and dividend re-investments.

• (2) A responsible person of an index-tracking leveraged UCITS shall include the following information in the prospectus of the UCITS:

• (a) a description of the leverage policy and how the leverage policy is implemented;

• (b) the cost of the leverage (where relevant);

• (c) the risks associated with the leverage policy;

• (d) a description of the impact of any reverse leverage;

• (e) a description of how the performance of the UCITS may differ significantly from the multiple of the index performance over the medium term to the long term.

Efficient portfolio management

• (a) a description of its intentions regarding techniques and instruments which may be used for the purposes of efficient portfolio management. This should include reference to the techniques and instruments which the UCITS can utilise and a detailed description of the inherent risks, including counterparty risk and potential conflict of interest, that may arise;

• (b) information on the impact of efficient portfolio management techniques and instruments on the performance of the UCITS;

• (c) information on the policy regarding direct and indirect operational costs and fees arising in the context of these techniques; and

• (d) information on the collateral policy of the UCITS arising from (as the case may be) OTC derivatives or efficient portfolio management techniques and instruments or both.

• (2) A disclosure for the purposes of paragraph (1) shall include:

• (a) permitted types of collateral;

• (b) the level of collateral required;

• (c) the haircut policy; and

• (d) in the case of cash collateral:

• (i) the re-investment policy; and

• (ii) the risks arising from the re-investment policy.

Dealing

• (a) the initial offer period;

• (b) the initial offer price;

• (c) in bold typeface, prominently at the beginning of the prospectus (or the relevant supplement to the prospectus, where appropriate), the maximum redemption charge; and

• (d) the time limits within which the equivalent of the net issue price is to be paid into the assets of the UCITS.

• (2) A responsible person that proposes to apply an anti-dilution levy to subscriptions or redemptions shall, in the prospectus of the relevant UCITS, include a provision to the following effect:

“In calculating the subscription or redemption price for the UCITS the directors may, on any dealing day on which there are net subscriptions or redemptions, adjust (as relevant) the subscription or redemption price by adding or deducting an anti-dilution levy to cover dealing costs and to preserve the value of the underlying assets of the UCITS.”

Redemption in specie

• (a) redemption in specie is:

• (i) at the discretion of the UCITS, and

• (ii) subject to the consent of the redeeming unit-holder;

• (b) asset allocation is subject to the approval of the depositary;

• (c) a determination to provide redemption in specie may be at the sole discretion of the responsible person where the redeeming unit-holder requests redemption of a number of units that represent at least 5 per cent of the net asset value of the UCITS.

• (2) In the event of a redemption in specie in accordance with subparagraph (c) of paragraph (1):

• (a) the responsible person shall, if so requested by the redeeming unit-holder, sell the assets on behalf of that unit-holder; and

• (b) the cost of the sale of the relevant units may be charged to the unit-holder.

• (3) Paragraph (1) does not apply to an exchange-traded fund where the original subscription was made in specie.

Remuneration and costs arising

• (a) in the same section of the prospectus and in a form that can be easily understood and analysed by unit-holders and prospective investors, information on remuneration, costs and expenses to be borne by the UCITS;

• (b) the policy of the UCITS regarding direct and indirect operational costs and fees arising from efficient portfolio management techniques and instruments that may be deducted from the revenue delivered to the UCITS.

• (2) A responsible person of an umbrella UCITS shall state clearly in the prospectus the charges (if any) that are applicable to the exchange of units in one sub-fund of the umbrella UCITS for units in another sub-fund of the umbrella UCITS.

Umbrella UCITS

“An umbrella fund with segregated liability between sub-funds”.

• (2) Where an umbrella UCITS issues a supplement to the prospectus in relation to the establishment of a new sub-fund, the supplement shall:

• (a) state that the UCITS is constituted as an umbrella UCITS; and

• (b) name the other existing sub-funds of that umbrella UCITS or ensure that the prospectus is updated to include the names of all existing sub-funds.

• (3) Where an umbrella UCITS investment company was authorised by the Bank and commenced trading before 30 June 2005 and does not have segregated liability between sub-funds, the responsible person shall disclose clearly in the relevant prospectus the potential risks to investors arising from the absence of the segregation of liability between sub-funds.

Authorisation status

• (a) states that the authorisation of the UCITS by the Bank is not an endorsement or guarantee of the UCITS by the Bank;

• (b) states that the Bank is not responsible for the contents of the prospectus; and

• (c) includes the following statement:

“The authorisation of this UCITS by the Central Bank of Ireland shall not constitute a warranty as to the performance of the UCITS and the Central Bank of Ireland shall not be liable for the performance or default of the UCITS.”

Risk disclosures

• (2) A disclosure for the purposes of paragraph (1) shall make reference to at least:

• (a) the fact that prices of units may fall as well as rise;

• (b) that investors are recommended to consult a stockbroker or financial adviser about the contents of the prospectus; and

• (c) where relevant, the fact that the difference at any one time between the sale and repurchase price of units in the UCITS arising from the repurchase charge means that the investment should be viewed as medium term to long term investment.

• (3) A responsible person of a UCITS that has investment objectives or an investment policy that involves investing:

• (a) more than 20 per cent of the assets of the UCITS in emerging markets,

• (b) more than 30 per cent of the assets of the UCITS in bonds or warrants that are below investment grade,

or both, shall insert a risk warning informing investors that an investment in the UCITS should not constitute a substantial proportion of an investment portfolio and may not be appropriate for all investors.

• (4) A risk warning notice for the purposes of paragraph (3):

• (a) shall be inserted and highlighted at the beginning of the prospectus (or the relevant supplement to the prospectus, where appropriate); and

• (c) must cross-refer to the more detailed disclosure of risk factors which are contained in the body of the prospectus (or supplement).

• (5) Where paragraph (3) applies the relevant prospectus (or the relevant supplement to the prospectus, where appropriate) shall contain a full description of the risks that are involved.

UCITS that use financial derivative instruments

Cash and money-market funds

Structured UCITS

Distributions out of capital

• (a) an explanation of the rationale underlying the policy to make distributions out of capital;

• (b) in accordance with paragraph (2), a risk warning, set out prominently at the front of the prospectus, that describes the effects of making a distribution from capital;

• (c) a statement that a distribution out of capital may have different tax implications to a distribution of income so that investors are recommended to seek advice in this regard; and

• (d) a statement indicating the greater risk of capital erosion that exists and the likelihood that, due to capital erosion, the value of future returns would also be diminished.

• (2) A risk warning referred to in subparagraph (b) of paragraph (1) shall highlight that, in the event of the making of a distribution out of capital:

• (a) capital will be eroded;

• (b) the distribution is achieved by forgoing the potential for future capital growth; and

• (c) this cycle may continue until all capital is depleted.

• (3) A responsible person shall charge fees and expenses, including management fees, to the capital of a UCITS only if the prospectus of the relevant UCITS includes each of the following:

• (a) a statement that fees and expenses, including management fees, or a portion of any such fee or expense, may be charged to capital;

• (b) an explanation of the rationale underlying the policy to charge fees and expenses to capital;

• (c) a risk warning, set out prominently in bold text at the front of prospectus, which states:

“Unit-holders should note that all or part of fees and expenses, including (if applicable) management fees, will may be charged to the capital of the UCITS. This will have the effect of lowering the capital value of your investment”;

and

• (d) a description of the effects that the charging of fees and expenses (including management fees) to capital may have, including that capital may be eroded.

• (4) Where a UCITS invests more than 20 per cent in fixed-income instruments and the priority of the UCITS is the generation of income rather than capital growth, the responsible person shall ensure that:

• (a) this priority is disclosed in the prospectus of the relevant UCITS; and

• (b) the prospectus of the relevant UCITS includes a statement that a distribution made during the life of the UCITS must be understood as a type of capital reimbursement.

Conflicts of interest

• (2) A responsible person shall include in the prospectus of the relevant UCITS a description of soft commission arrangements that may be entered into by a responsible person or a connected person.

• (3) Where it is envisaged that a UCITS and connected persons may enter into transactions with each other, the responsible person shall ensure that the prospectus discloses the fact that such transactions may occur.

• (4) In this Regulation “connected person” has the meaning given to the term in Regulation 40.

Directed brokerage services and similar arrangements

Share classes

• (2) A responsible person shall ensure that the prospectus of the relevant UCITS includes:

• (a) a description of the general currency hedging strategies of the UCITS and the features of individual currency share classes;

• (b) where a UCITS intends to invest in any asset that is denominated in a currency other than the base currency, a disclosure:

• (i) as to whether it is the intention of the UCITS to hedge the resulting currency exposure back into the base currency and, if it is so intended, to what extent; and

• (ii) of the general costs and, if relevant, exchange rate risk that is associated with the currency strategy;

• (c) where a UCITS has established an unhedged currency share class, a disclosure:

• (i) that a currency conversion will take place upon subscriptions, redemptions and distributions at prevailing exchange rates; and

• (ii) that the value of the share expressed in the class currency will be subject to exchange rate risk in relation to the base currency; and

• (d) where a UCITS has established hedged share classes, a disclosure of this fact, in accordance with paragraph (3).

• (3) A disclosure for the purposes of subparagraph (d) of paragraph (2) shall state:

• (a) that, to the extent that hedging is successful, the performance of the class is likely to move in line with the performance of the underlying asset or assets;

• (b) that investors in the hedged class will not benefit if the class currency falls against the base currency or against the currency in which the assets of the UCITS are denominated; and

• (c) the implications (for unit-holders) of the hedging policy, including at least the following:

• (i) a statement indicating the extent to which the UCITS intends to hedge against currency fluctuations and noting that, while not the intention, nonetheless over-hedged or under-hedged positions may arise due to factors outside of the control of the UCITS;

• (ii) a statement that over-hedged positions shall not exceed 105 per cent of the net asset value of the class;

• (iii) a statement that the hedged positions will be kept under review to ensure that over-hedged positions do not exceed the permitted level;

• (iv) a statement that transactions will be attributable clearly to a specific class;

• (v) a statement that currency exposures of different currency classes may not be combined or offset and that currency exposures of assets of the UCITS may not be allocated to separate share classes; and

• (vi) a statement that the costs and gains or losses of the hedging transactions will accrue solely to the relevant class.

• (4) A review for the purposes of clause (iii) of subparagraph (c) of paragraph (3) shall incorporate a procedure to ensure that any position materially in excess of 100 per cent of net assets is not carried forward from month to month.

PART 5 KEY INVESTOR INFORMATION DOCUMENT

General

• (a) the ESMA Guidelines on clear language and layout of the key investor information document (Ref: CESR/10-1320);

• (b) the ESMA Guidelines on the methodology for calculation of the ongoing charges figure in the Key Investor Information Document (Ref: CESR/10-674);

• (c) the ESMA Guidelines on the methodology for the calculation of the synthetic risk and reward indicator in the Key Investor Information Document (Ref.: CESR/10-673);

• (d) the ESMA template for the Key Investor Information Document (Ref.: CESR/10-1321);

• (e) the ESMA Guidelines selection and presentation of performance scenarios in the Key Investor Information document for structured UCITS (Ref.: CESR/10-1318).

Investment objective and policy

• (a) where a UCITS is established as an index-tracking UCITS, the KIID shall include, in summary form, information on how the index will be tracked and the implications of the chosen method for unitholders in terms of their exposure to the underlying index and counterparty risk; and

• (b) where a UCITS is established as an index-tracking leveraged UCITS, the KIID shall include, in summary form, the following information:

• (i) a description of the leverage policy, how this is achieved (i.e. whether the leverage is at the level of the index or arises from the way in which the UCITS obtains exposure to the index), the cost of the leverage (where relevant) and the risks associated with this policy;

• (ii) a description of the impact of any reverse leverage (i.e. short exposure);

• (iii) a description of how the performance of the UCITS may differ significantly from the multiple of the index performance over the medium to the long term.

• (2) In relation to a structured UCITS, as defined in Article 36(1) of Commission Regulation No. 583/ 2010, if the pre-determined pay-off is available only to those investors that buy units at a certain point and hold them until a certain date, the responsible person shall ensure that the relevant KIID:

• (a) includes a statement to this effect;

• (b) details the consequences for an investor of buying and selling units in the UCITS other than in instances in which the pre-determined pay-off is available; and

• (c) if a guarantee from an independent third party is offered, includes an explanation of such guarantee.

Risk and reward profile

(2)(a) A responsible person of a UCITS established as a feeder fund shall, in the KIID, include:

• (i) a description of the risk and reward profile of the UCITS; and

• (ii) where the ancillary assets held by the feeder UCITS impact on the risk and reward profile of the UCITS, a disclosure of this fact.

• (b) A description for the purposes of clause (i) of subparagraph (a) shall not be materially different to the risk and reward profile of the corresponding master UCITS.

Filing requirements

• (2) When filed with the Bank in accordance with paragraph (1), a KIID must be accompanied by written confirmation from the responsible person or the legal adviser to the UCITS to the Bank that:

• (a) the KIID complies with the requirements of the UCITS Regulations, Commission Regulation (EU) No 583/2010 and these Regulations;

• (b) the information in the KIID does not conflict with the content of the prospectus.

• (3) Every new KIID and amended KIID shall be submitted by the responsible person to the Bank.

PART 6 GENERAL OPERATIONAL REQUIREMENTS

Regulated markets

• (2) A responsible person shall consult with the depositary to ensure that adequate custody arrangements are in place before including additional stock exchanges or markets in the prospectus.

Directed brokerage services or similar arrangements

PART 7 ANNUAL AND HALF-YEARLY REPORTS OF A UCITS

Publication of annual and half-yearly reports

• (2) The responsible person shall ensure that:

• (a) the first annual or half-yearly report be prepared within 9 months of the launch UCITS and shall be published and submitted to the Bank within 2 months if half-yearly or 4 months for annual; and

• (b) the first annual report shall be submitted to the Bank within 18 months of the incorporation or establishment of that UCITS and shall be published within 4 months.

• (3) Where an umbrella UCITS produces separate periodic reports for individual sub-funds, the responsible person shall, in the report for each sub-fund, name the other sub-funds and state that the reports of such sub-funds are available free of charge on request from the management company.

• (4) Each annual and half-yearly report shall state whether the board of directors of the responsible person is satisfied that:

• (a) there are in place arrangements, evidenced by written procedures, to ensure that the obligations that are prescribed by Regulation 41(1) are applied to all transaction with a connected party; and

• (b) all transaction with a connected party that was entered into during the period to which the report relates complied with the obligations that are prescribed by Regulation 41(1).

Additional information to be included in the annual report

• (a) in addition to the requirements of the UCITS Regulations, include the information that is prescribed in Schedule 7;

• (b) document all material changes that have occurred in the disposition of the assets of the UCITS.

• (2) For the purposes of subparagraph (b) of paragraph (1):

• (a) a material change is defined as aggregate purchases of a security exceeding 1 per cent of the total value of purchases for the period or aggregate disposals greater than 1 per cent of the total value of sales;

• (b) if there were fewer than 20 purchases that met the material changes definition, the UCITS shall disclose those purchases and such number of the next largest purchases so that at least 20 purchases are disclosed; and

• (c) if there were fewer than 20 sales that met the material changes definition, the UCITS shall disclose those sales and such number of the next largest sales so that at least 20 sales are disclosed.

• (3) If a sub-fund within an umbrella investment company invests in the units of another sub-fund within that umbrella, the responsible person shall, in its annual report:

• (a) disclose the fact of that investment; and

• (b) explain the policies that have been adopted by the umbrella investment company to disclose cross-investments between sub-funds within that umbrella investment company.

Additional information to be included in the half-yearly report

• (a) in addition to the requirements of the UCITS Regulations, include the information that is prescribed in Schedule 8;

• (b) document all material changes that have occurred in the disposition of the assets of the UCITS.

• (2) For the purposes of subparagraph (b) of paragraph (1) the criteria specified in Regulation 79(2) shall apply.

• (3) If a sub-fund within an umbrella investment company invests in the units of another sub-fund within that umbrella, the responsible person shall, in its half-yearly report:

• (a) disclose the fact of that investment; and

• (b) explain, in a note to the half-yearly report, the policies that have been adopted by the umbrella investment company to disclose cross-investments between sub-funds within that umbrella investment company.

PART 8 REQUIREMENTS IN RESPECT OF SPECIFIC TYPES OF FUND

Interpretation: Part 8

Exchange-traded funds

A responsible person of a UCITS ETF shall ensure that, in its name and in each of the types of document set out in paragraph (2), the relevant UCITS ETF uses the identifier “UCITS ETF” to identify it as an exchange-traded fund.

• (2) The types of document to which paragraph (1) refers are, in respect of the particular UCITS ETF:

• (a) the constitutional document;

• (b) the prospectus;

• (c) the KIID; and

• (d) marketing communications.

• (3) A responsible person of a UCITS ETF shall, in:

• (a) the prospectus,

• (b) the KIID, and

• (c) the marketing communications of the UCITS ETF,

disclose the policy of the UCITS ETF regarding portfolio transparency and where information on the portfolio may be obtained, including where the indicative net asset value, if applicable, is published.

• (4) A responsible person of a UCITS ETF, that calculates the indicative net asset value, shall, in its prospectus, disclose:

• (a) how the indicative net asset value is calculated;

• (b) the frequency of that calculation.

• (5) A responsible person of a UCITS which is not a UCITS ETF shall not use the identifier UCITS ETF, ETF or exchange-traded fund in any type of document, including those specified in paragraph (2).

Actively managed UCITS ETFs

• (a) the prospectus,

• (b) the KIID, and

• (c) the marketing communications of the actively managed UCITS ETF, disclose:

• (i) that the UCITS ETF is an actively managed UCITS ETF; and

• (ii) how the UCITS ETF will meet the stated investment policy including, where applicable, its intention to outperform an index.

Treatment of secondary market investors of a UCITS ETF

“UCITS ETF’s units purchased on the secondary market cannot usually be sold directly back to UCITS ETF. Investors must buy and sell units on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current net asset value when buying units and may receive less than the current net asset value when selling them.”

• (2) Where the stock exchange value of the units of a UCITS ETF varies significantly from its net asset value, the responsible person shall ensure that an investor who has acquired:

• (a) a unit, or

• (b) where applicable, any right to acquire a unit that was granted by way of distributing a respective unit,

on the secondary market, may sell the unit back to the UCITS ETF directly.

• (3) Where paragraph (2) applies, the responsible person of the relevant UCITS ETF shall communicate to the relevant regulated market that the UCITS ETF accepts direct redemptions at the level of the UCITS ETF.

• (4) Where paragraph (2) applies:

• (a) a responsible person of a UCITS ETF shall, in its prospectus, disclose:

• (i) the process that is to be followed by an investor who has purchased a unit on the secondary market; and

• (ii) the potential costs involved in redeeming directly from the UCITS ETF; and

• (b) the responsible person shall ensure that the costs for redeeming directly from the UCITS are not excessive.

Money-market UCITS

• (a) the prospectus, and

• (b) the KIID,

state whether the relevant UCITS is a Short-Term Money-Market Fund or a Money-Market Fund.

• (2) A responsible person of a UCITS that is a money-market fund shall, in its prospectus:

• (a) include a risk warning highlighting the difference between the nature of a deposit and the nature of an investment in a money-market fund, including mention of the risk that the principal invested in a money-market fund is capable of fluctuation;

• (b) provide information to investors on the risk and reward profile of the fund so as to enable an investor to identify any specific risks linked to the investment strategy of the money-market fund.

• (3) Information that is provided in accordance with subparagraph (b) of paragraph (2) shall:

• (a) in the case of every money-market fund, include, where relevant, investment in new asset classes, financial instruments or investment strategies that have unusual risk and reward profiles; and

• (b) in the case of a Money-Market Fund, take account of the longer WAM and WAL.

Short-Term Money-Market Funds

• (a) maintain the principal of the fund; and

• (b) provide a return in line with money-market rates.

• (2) A responsible person of a UCITS that is a Short-Term Money-Market Fund shall ensure that the relevant UCITS:

• (a) invests only in the following:

• (i) high quality money-market instruments, as determined by the responsible person, that comply with the criteria for money-market instruments as set out in the UCITS Regulations; and

• (ii) deposits with credit institutions specified in Regulation 7;

• (b) takes into account and documents the assessment by the responsible person of at least the following factors, in determining the quality of a relevant investment:

• (i) the credit quality of the instrument;

• (ii) the nature of the asset class represented by the instrument;

• (iii) in the case of a structured financial instrument, the operational and counterparty risk associated with the instrument; and

• (iv) the liquidity profile of the instrument;

• (c) for the purposes of clause (i) of subparagraph (b), where a money-market instrument:

• (i) was subject to a credit rating by an agency registered and supervised by ESMA that rating shall be taken into account by the responsible person in the credit assessment process; and

• (ii) where a money-market instrument is downgraded below the two highest short-term credit ratings by the credit rating agency referred to in clause (i) this shall result in a new credit assessment being conducted of the instrument by the responsible person without delay; and

• (d) monitors the credit quality of each of its investments on an ongoing basis.

• (3) A responsible person of a UCITS that is a Short-Term Money-Market Fund shall ensure the relevant UCITS:

• (a) invests only in securities or instruments that have a residual maturity until the legal redemption date of not greater than 397 days;

• (b) provides daily net asset value and price calculations and has daily subscriptions and redemptions of units;

• (c) ensures that the WAM of the portfolio does not exceed 60 days;

• (d) ensures that the WAL of the portfolio does not exceed 120 days;

• (e) takes into account the impact of FDIs, deposits and efficient portfolio management techniques and instruments when calculating the WAM and WAL;

• (f) ensures that it is not exposed, directly or indirectly, to equities or commodities, including through any FDI;

• (g) invests only in FDIs when these are in line with the money-market investment strategy of the UCITS;

• (h) invests only in FDIs that give exposure to foreign exchange for hedging purposes;

• (i) does not invest in a non-base currency unless the exposure is fully hedged;

• (j) does not invest in another investment fund unless that other investment fund also is a short-term money-market fund; and

• (k) has either a constant or fluctuating net asset value.

• (4) For the purposes of subparagraph (d) of paragraph (3), when calculating the WAL for securities, including structured financial instruments:

• (a) the responsible person shall base the maturity calculation on the residual maturity until the legal redemption of the instruments; and

• (b) for the purposes of paragraph (a), where a financial instrument embeds a put option, the exercise date of the put option may be used instead of the legal residual maturity if the following conditions apply at all times:

• (i) the put option can be exercised freely by the UCITS at its exercise date;

• (ii) the strike price of the put option remains close to the expected value of the instrument at the next exercise date; and

• (iii) the investment strategy of the UCITS implies that there is a high probability that the option will be exercised at the next exercise date.

Money-Market Funds

• (a) maintain the principal of the fund; and

• (b) provide a return in line with money-market rates.

• (2) A responsible person of a UCITS that is a Money-Market Fund shall ensure that the relevant UCITS:

• (a) invests only in the following:

• (i) high quality money-market instruments, as determined by the responsible person that comply with the criteria for money-market instruments as set out in the UCITS Regulations; and

• (ii) deposits with credit institutions referred to in Regulation 7;

• (b) takes into account and documents the assessment by the responsible person of at least the following factors, in determining the quality of a relevant investment:

• (i) the credit quality of the instrument;

• (ii) the nature of the asset class represented by the instrument;

• (iii) in the case of a structured financial instrument, the operational and counterparty risk associated with the instrument; and

• (iv) the liquidity profile of the instrument;

• (c) For the purposes of clause (i) of subparagraph (b), where a money-market instrument:

• (i) was subject to a credit rating by an agency registered and supervised by ESMA that rating shall be taken into account by the responsible person in the credit assessment process; and

• (ii) where a money-market instrument is downgraded below the two highest short-term credit ratings by the credit rating agency referred to in clause (i) this shall result in a new credit assessment being conducted of the instrument by the responsible person without delay; and

• (d) monitors the credit quality of each of its investments on an ongoing basis.

• (3) A responsible person of a UCITS that is a Money-Market Fund shall ensure the relevant UCITS:

• (a) invests only in securities or instruments that have a residual maturity until the legal redemption date of not greater than two years, provided that the time remaining until the next interest reset date is not greater than 397 days;

• (b) provides daily net asset value and price calculations and has daily subscriptions and redemptions of units;

• (c) ensures that the WAM of the portfolio does not exceed six months;

• (d) ensures that the WAL of the portfolio does not exceed 12 months;

• (e) takes into account the impact of FDIs, deposits and efficient portfolio management techniques and instruments when calculating the WAM and WAL;

• (f) ensures that the UCITS is not exposed, directly or indirectly, to equities or commodities, including through FDIs;

• (g) invests only in FDIs that give exposure to foreign exchange for hedging purposes;

• (h) does not invest in a non-base currency unless the exposure is fully hedged;

• (i) does not invest in another investment fund unless that other investment fund is a short-term money-market fund or a money-market fund; and

• (j) has a fluctuating net asset value.

• (4) For the purposes of subparagraph (d) of paragraph (2), a floating rate security must reset to a money-market rate or index.

(5)(a) Subject to subparagraph (b), for the purposes of subparagraph (d) of paragraph (3), when calculating the WAL for a security, including a structured financial instrument, the responsible person shall base the maturity calculation on the residual maturity until the legal redemption of the instrument.

• (b) When a financial instrument embeds a put option, the exercise date of the put option may be used instead of the legal residual maturity if the following conditions apply at all times:

• (i) the UCITS can exercise the put option, at its exercise date, freely;

• (ii) the strike price of the put option remains close to the expected value of the instrument at the next exercise date; and

• (iii) the investment strategy of the UCITS implies that there is a high probability that the option will be exercised at the next exercise date.

Short-Term Money-Market Funds: valuation on the basis of amortised cost

• (2) For the purposes of paragraph (1), expertise shall be demonstrable where any of the following conditions is satisfied:

• (a) the short-term money-market fund has obtained a triple-A rating from an internationally recognised rating agency;

• (b) the responsible person is engaged in the management, or has been engaged in the management, of a triple-A rated money-market fund; or

• (c) in circumstances other than those in subparagraph (a) or subparagraph (b), where the responsible person or, where relevant, its delegate, has demonstrated to the Bank (through separate application) that appropriate expertise exists in the operation of this type of Money-Market Fund.

• (3) Where a UCITS is a Short-Term Money-Market Fund which uses the amortised cost valuation methodology, the responsible person of that UCITS shall:

• (a) ensure that, upon appointment and at all times thereafter, the persons responsible for the operation of that UCITS, including under any delegation arrangements, have the necessary expertise;

• (b) carry out a weekly review of discrepancies between the market value and the amortised cost value of its money-market instruments;

• (c) where a discrepancy in excess of 0.3 per cent occurs between the market value and the amortised cost value of the portfolio:

• (i) conduct a daily review; and

• (ii) notify the Bank of that discrepancy and provide to the Bank a description of the action, if any, that will be taken to reduce such discrepancy;

• (d) in its constitutional document, provide:

• (i) for the escalation procedure that is required by paragraph (4); or

• (ii) that a review of the amortised cost valuation vis--vis market valuation will be carried out in accordance with the requirements of the Bank.

• (4) For the purposes of the weekly review that is mandated by subparagraph (b) of paragraph (3), the responsible person shall have in place an escalation procedure to ensure that any material discrepancy between the market value and the amortised cost value of a money-market instrument is brought to the attention of personnel who are responsible for the investment management of the UCITS.

• (5) For the purposes of paragraph (4):

• (a) a discrepancy in excess of 0.1 per cent between the market value and the amortised cost value of the portfolio shall be brought to the attention of the responsible person; and

• (b) a discrepancy in excess of 0.2 per cent between the market value and the amortised cost value of the portfolio shall be brought to the attention of senior management of the responsible person, and to the attention of the depositary.

• (6) A responsible person of a UCITS that is a Short-Term Money-Market Fund, which uses the amortised cost valuation methodology, shall:

• (a) document the occurrence and the outcome of every weekly review, every daily review and every engagement (if any) of the escalation procedure that is set out in paragraph (4);

• (b) undertake and document a monthly portfolio analysis, incorporating stress-testing of the portfolio, to examine portfolio returns under various market scenarios to determine if the portfolio constituents are appropriate to meet pre-determined levels of credit risk, interest rate risk, market risk and investor redemptions.

• (7) A responsible person shall ensure that a UCITS that is a Money Market Fund shall not follow the amortised cost valuation methodology.

European Central Bank reporting requirements

• (a) a monthly return, in accordance with paragraph (2), that shall be provided to the Bank within six business days of the last business day of the month to which it relates; and

• (b) a quarterly return, in accordance with paragraph (3).

• (2) A return prepared for the purposes of subparagraph (a) of paragraph (1) shall:

• (a) consist of aggregated and summarised balance sheet data;

• (b) break down all components of assets into three general issuer categories:

• (i) Irish;

• (ii) other Monetary Union Member States; and

• (iii) the rest of the world.

• (3) A return prepared for the purposes of subparagraph (b) of paragraph (1) shall:

• (a) be prepared, on a quarterly basis, to the end of March, the end of June, the end of September and the end of December;

• (b) be received by the Bank within ten business days of the last business day of the quarter to which it relates; and

• (c) includes a more detailed breakdown of the data that is included in the monthly return that is prepared for the purposes of subparagraph (a) of paragraph (1), including a profile of the issuers and the maturity of the assets that the Money-Market Fund holds.

PART 9

GUARANTEED UCITS

General

Legal agreement

• (a) the guarantee shall be evidenced in a contract that is legally enforceable under Irish law before the courts of Ireland, unless it can be demonstrated that the law of another jurisdiction or the existence of a non-exclusive foreign jurisdiction clause is best market practice;

• (b) the responsible person shall satisfy itself, and retain records to demonstrate the basis for that satisfaction, that it is within the legal capacity of the guarantor to enter the guarantee;

• (c) the guarantee shall not contain any onerous provision in respect of the UCITS that would permit the guarantor to invalidate the guarantee.

• (2) A responsible person shall, in advance of using the word “guaranteed” in the name of a UCITS, provide to the Bank written confirmation from the legal adviser to the UCITS that the guarantee satisfies the conditions set out in paragraph (1).

• (3) The responsible person shall not act as a guarantor for the purposes of this Part.

• (4) For the purposes of Regulation 90, the guarantor must be:

• (a) an entity of substance and good standing; and

• (b) a credit institution with paid-up share capital in excess of €100 million which is of a type that is mentioned in Regulation 7.

Disclosure

• (a) the legal name and any business or trading name of the guarantor;

• (b) the obligations of the UCITS under the guarantee, including detail on the cost of the guarantee;

• (c) the nature, timing and terms of the guarantee;

• (d) a warning to the effect that any performance of the guarantee is dependent on the solvency of the guarantor at the relevant time;

• (e) a clear description of the upside limitation as well as the downside protection, sufficient for an investor to make an informed judgement about the practical and economic value of the guarantee; and

• (f) where relevant, the impact on an investor who sells their units prior to the maturity of the guarantee.

PART 10 CROSS-BORDER NOTIFICATION OF UCITS

Outward marketing: UCITS authorised under the UCITS Regulations

• (2) A responsible person that markets units of a UCITS in a Member State of the EEA or is approved to market the units of a UCITS in a jurisdiction other than a Member State of the EEA shall notify the Bank in the event that the UCITS ceases to market units in that Member State or jurisdiction.

Inward marketing: UCITS authorised in another Member State

• (2) The responsible person of a UCITS that is authorised in another Member State and which markets its units in the State, shall ensure that the prospectus of the relevant UCITS provides the following information for Irish investors:

• (a) details of the facilities agent and of the facilities that are being maintained; and

• (b) relevant provisions of Irish tax laws.

• (3) Where: