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Central Bank of Ireland – Thematic Review of Fund Management Companies

Central Bank of Ireland – Thematic Review of Fund Management Companies

On Tuesday, 20 October 2020, the Central Bank of Ireland (Central Bank) published the findings of its thematic review of Irish Fund Management Companies (FMCs) governance, management and oversight. The Central Bank’s FMC Framework (Framework) was first introduced in 2017 for firms seeking new authorisation and was extended to existing firms in mid-2018. The Framework, underpinned by legislation designed to deliver investor protection, market integrity and systemic resilience, was introduced to provide increased clarity as to the standards to be met by FMCs. The Framework provides a strong basis for firms to identify and retain the level and nature of resources needed to put in place the required governance, management, systems and controls. 

The findings of the thematic review, which are summarised below, noted that a significant number of previously authorised FMCs had not fully implemented the Framework 

EisnerAmper’s Risk & Regulatory team, led by Tom Brennan, Partner, advises FMCs on risk, regulatory and compliance-related matters. For more information on our services, please click here.

Thematic Review – Summary of key findings:

  • Resourcing:
    • According to the Central Bank, several FMCs, who were authorised prior to CP86 (Consultation on Fund Management Company Effectiveness-Delegate Oversight taking effect, had not increased their resources adequately to ensure effective implementation of the Framework. As such, the Central Bank expects a minimum of three full-time employees (FTEs) in all FMCs, each of whom should be suitably qualified and of appropriate seniority to fulfil the role. This FTE requirement is a minimum expectation and only relevant to the smallest and simplest of entities. 
    • Larger firms are expected to have greater levels of resources in place, depending on the nature, scale and complexity of their operations.
    • The Central Bank also expects “all but the smallest firms to have a CEO responsible for the day to day running of the business. 
    • The review noted that 28% of FMCs had instances where an INED had a tenure exceeding 10 years. The Central Bank expects tenure and ongoing independence to be considered as part of the Organisational Effectiveness (OE) Director’s review of board composition.
  • Designated Persons: The review also identified shortcomings in how the Designated Persons (DP) role is discharged including poor quality of reporting to the Board, inadequate challenge of delegates, insufficient review of delegate reports and insufficient time committed to the role
  • Delegate Oversight: Several deficiencies were identified in relation to delegate oversight, including 
    • Some FMCs could not evidence compliance with Central Bank expectations in terms of initial and ongoing due diligence performed on delegates;  
    • Where reliance was placed on the policies and procedures of group/delegates, not all FMCs could evidence review of the policies and procedures; 
    • Some firms did not properly document service level agreements (SLAs) with regard to delegated activities; and  
    • In some cases, delegate reports were not of sufficient quality to allow for a meaningful review of the situation by the FMC.
  • Risk Management Framework: Shortcomings were identified in the risk management framework of several FMCs, whereby many firms did not have: 
    • An entity specific risk management framework;  
    • An entity specific risk register; and  
    • A defined risk appetite  
  • Board approval of new funds: Some FMCs under review were unable to demonstrate Board approval for the launch of sub-funds. Additionally, there was often a lack of evidence of Board discussions in relation to setting or agreeing the proposed strategy of the fund prior to submission of the application to the Central Bank
  • Organisational Effectiveness Director: Certain weaknesses were identified in how the Organisational Effectiveness (OE) Director executes the role in many FMCs, including 
    • The OE Director not being able to evidence that meetings took place;  
    • The absence of formal records of meetings with Designated Persons;  
    • An absence of formal reporting to the Board (principally in the area of resource evaluation); and  
    • A lack of consideration given to conflicts of interest and personal transactions 
  • Gender Balance: A substantial gender imbalance on the Boards of FMCs was noted in the review with only 16% of director roles held by women 

Actions Required:

The Central Bank requires all FMCs to assess their operational, resourcing and governance arrangements against all relevant rules and guidance, taking into account the findings of its thematic review. FMCs are required to develop and progress individual action plans to make the necessary changes to ensure full and effective embedding of all aspects of the Central Bank’s requirements and related guidance. These assessment and implementation plans must be approved by the board of directors of the FMC by the end of Q1 2021 and should at a minimum include the following: 

  • The time commitment, skills and expertise of available resources;  
  • The FMC’s retained and delegated tasks, including how ongoing independent challenge of all delegates can be ensured;  
  • The tasks required by the framework, including those that must be completed on a fund by fund basis;  
  • How resources and operational capacity will need to increase to take account of any increase in the nature, scale and complexity of the funds under management since authorisation or the last time the FMC critically assessed its operations; and  
  • How resources and operational capacity will need to increase to deal with a market and/or operational crisis 

How EisnerAmper Ireland can help

Our Risk & Regulatory team, led by Tom Brennan, advises financial services providers on risk, regulatory and compliance-related matters. Our services include: 

  • Supporting organisations throughout the regulatory engagement lifecycle;  
  • Provision of outsourced compliance services; 
  • Provision of bespoke board support and training;  
  • Designing and developing integrated risk and compliance frameworks;  
  • Preparing compliance briefings for discussion with the board covering new / pending legislation, marketplace intelligence, regulatory sanctions and impacts thereof;  
  • Supporting the board in responding to and implementing any changes required relating to evolving needs 

Learn more about our Risk & Regulatory Services here, alternatively, request a callback from our Risk and Regulatory team now.



The content above is provided for general information purposes only and is not intended to provide, nor does it constitute, professional advice on any particular matter. If you would like more information or would like to discuss any of the topics raised above, please contact the author(s).

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