Role of the Promoter
The CBI1 currently stipulates that all UCITS2 applications must be coordinated by an entity which has relevant experience and appropriate financial resources. The CBI views entities regulated in equivalent jurisdictions as having relevant expertise. Shareholder funds of EUR 635,000 is deemed to be sufficient financial resources. It should be noted that in many instances this exceeds the amount required in a firm’s home jurisdiction. This entity is the promoter and is viewed as the driving force behind the fund and is responsible for determining the fund’s legal structure and service providers.
Significantly, there is no legal obligation on the promoter to stand over the financial performance of a fund. It could be argued that under the current regime the promoter offers little protection to a fund in financial distress.
Regulatory Developments
In 2013, the CBI removed the requirement for all AIF’s3 to be established by a promoter. The CBI confirmed that reliance could be placed on the AIFM4 obligations under AIFMD5
In January 2014, the CBI issued consultation paper 77 which proposed eliminating the promoter required for UCITS. The aim of the proposal was to create consistency with the AIF regime and for UCITS to rely on the regulatory regime for UCITS management companies. This change will be effective November 1, 2015.
Consequences of the Regulatory Change for UCITS
- In the absence of a promoter, reliance regarding the overall management of UCITS is to be placed on the relevant management company. The CBI intends to provide additional clarification regarding the duties of a regulated management company when a UCITS gets into difficulty.
- The UCITS authorisation process will be simplified and will benefit from increased efficiency. The promoter minimum shareholder funds requirement of EUR 635,000 was a barrier to entry for many entities and the removal of this requirement is a positive development for potential new entrants to the UCITS marketplace.
- Under the existing promoter regime, smaller investment managers often used platforms to meet the shareholder funds requirement. With the promoter requirement eliminated, many such managers may establish stand-alone UCITS.
How can KB Associates Assist?
KB Associates offers a range of services to UCITS including set-up project management, the provision of directors, MLRO6 services, operational and compliance support and the performance of business plan functions.
If you would like to discuss any issues raised in this article or related to KB Associates’ services in general, please feel free to contact Mike Kirby (+353 1 667 1980), Peter Northcott (+44 203 170 8813) or Mike Parton (+1 345 946 4224).
1 Central Bank of Ireland
2 Undertakings for Collective Investment in Transferable Securities
3 Alternative Investment Funds
4 Alternative Investment Fund Manager
5 Alternative Investment Fund Managers Directive
6 Money Laundering Reporting Officer