An Independent Review of Organisational Effectiveness with the Irish Funds Industry

Introduction

Both Bridge Consulting and Governance Ireland have come together to carry out a review on the new “Organisational Effectiveness” role which has emerged from the Central Bank of Ireland’s final guidance on Consulting Paper 86 (CP86). So what is ‘CP86’? In an industry well versed in acronyms, CP86 refers to an initiative by the Central Bank of Ireland aimed at reviewing fund management company effectiveness in Ireland. By underpinning the substantive controls of fund management companies approved and licensed to operate in Ireland, the Central Bank is looking to further enhance investor protection.

The Central Bank of Ireland (CBI) commenced this consultation with the Irish funds industry in September 2014 and via three separate consultations, the process culminated in final guidance being issued in December 2016 (see Appendix 1 – Feedback & Guidance). In carrying out this process, the CBI examined the following areas:

1. Delegate Oversight
2. Organisational Effectiveness
3. Directors Time Commitments
4. Managerial Functions
5. Operational Issues
6. Procedural Matters

Our review focuses on item 2 – Organisational Effectiveness (‘OE’), for which the CBI provided the least detailed guidance.

Who does CP86 / Organisational Effectiveness impact?

The scope of the new guidance as set out by the Central Bank of Ireland on 19 December 2016 impacts Investment Companies, UCITS Management Companies, Alternative Investment Fund Managers (AIFMs) and Alternative Investment Fund Management Companies incorporated and authorised in Ireland.

Overview of the OE Role within CP86

The CBI’s guidance aims at ensuring that an independent director within a fund management company remains continuously focused on the organisational effectiveness of the fund company and its delegates. The guidance addresses the controls required by fund management companies. It ensures that correct substantive controls are in place and are being effectively monitored on an ongoing basis. The new OE role sits alongside – six newly consolidated Designated Management functions that apply to all new UCITS / AIF fund management companies or self managed entities established in Ireland (Appendix 2 – Consolidation of Management Functions). This applies immediately to newly authorised firms and from 1 July 2018 for existing legacy Irish funds

(Appendix 3 – CP86 Timetable)

Background to the Bridge Consulting / Governance Ireland Review

Why carry out the review?

Due to the number of questions that have arisen within the Irish funds industry on OE, Bridge Consulting and Governance Ireland came together to co-chair a series of workshops on the topic. Invitations were provided to a range of industry professionals operating within the Irish funds industry. The groups consisted of Independent Non-Executive Directors and representatives from leading legal and consultancy firms.