The CBI’s guidance on Fund Management Company Effectiveness (CP86) by fund management companies (‘ManCos’), self-managed UCITS and internally managed AIFs (together ‘SMICs’) was implemented on 1 July 2018. CP86 provides guidance on seven key areas:
- The rationale for board composition
- Directors’ time commitments
- Organisational effectiveness
- Managerial functions
- Delegate oversight
- Operational issues
- Procedural matters
CBI CP86 Thematic Review
Since the implementation of CP86, the CBI has increased the substance requirements for new ManCo and SMIC applications significantly. In 2019, the CBI began a thematic review of the implementation of CP86. The expectation for the outcome of the thematic review is that the CBI will apply the same substance requirements to existing structures as to newly authorised structures.
To begin its CP86 review, the CBI wrote to over 300 in-scope ManCos and SMICs. The correspondence contained a questionnaire for completion by close of business on Friday, 5 July 2019. The CBI’s stated aim of the questionnaire was
…..to identify standards of industry compliance in order to inform our supervisory approach and ensure that the required effectiveness and systems of governance are in place to protect investors’ best interests.
The questionnaire focused on seven core areas:
- Governance and Business Model
- Delegate Oversight
- Organisational Effectiveness
- Directors’ Time Commitments
- Managerial Functions
- Operational Issues
- Procedural Matters
A summary of the content of each section in this questionnaire is included here
Following a review of the questionnaire responses received, the CBI completed in-depth desktop reviews of a selected sample of ManCos and SMICs in August and September 2019. These desktop reviews focussed on specific questions in relation to the performance of certain managerial functions and requested items such as:
- Designated person biographies
- Designated person appointment letters
- Sample reporting received from delegates
- Sample reporting provided to fund boards from the relevant designated persons
The desktop reviews also focussed on the performance of the organisational effectiveness role (which was introduced under CP86) and requested items such as organisational effectiveness reports and completed board assessment questionnaires.
In Q1 2020, the CBI has begun to conduct on-site inspections of a selected sample of ManCos and SMICs. During the onsite visits, the CBI is requesting face-to-face interviews with certain designated persons and with the director responsible for organisational effectiveness.
The CBI has provided an indicative timeline of Q3/Q4 2020 for when it will communicate with existing ManCos/SMICs on changes required to existing substance requirements.
You can download a copy of CP86 – Central Bank of Ireland Thematic Review – Summary and Timeline here
KB Associates Services
KB Associates provides a range of services to investment funds including:
- The provision of UCITS ManCo/AIFM services
- The provision of designated persons to perform UCITS business plan/AIFMD PoA functions
- The provision of operational and compliance services to both UCITS and AIFMD compliant structures
If you would like to discuss the CBI’s CP86 thematic review further, please contact:
- Mike Kirby (+353 1 667 1980, mike.kirby@kbassociates.ie)
- Andrew Kehoe (+353 1 613 6396, andrew.kehoe@kbassociates.ie)