The luck of the Irish

by Bill Blevins, Financial Correspondent
Blevins Franks International Limited

The international funds industry in Ireland can be traced back to 1989 following the establishment of the International Financial Services Centre in Dublin in 1987. From a very small start in the late 1980s, Ireland has now grown to one of the largest offshore financial centres in the world. The success attained in the investment funds area since 1989 in Ireland is evidenced through the number of international fund promoters who have chosen Ireland as a domicile for their funds. This has been the platform from which almost 3,000 funds/sub-funds were launched in Dublin with associated asset value of 329bn euro as at the end of March 2002.

The challenge presented the Central Bank of Ireland (CBI) has been to achieve the right balance between engaging in a rigorous and thorough approvals process while maintaining an efficient and streamlined system, capable of adhering to tight deadlines for authorisation. The general consensus is that the CBI has managed to get the balance right. The CBI seeks to ensure parties behind the fund are of sound financial standing and are competent in the investment strategies they wish to pursue.

Promoter approval

The CBI operates a promoter approval process in order to determine whether the party behind the proposal to establish a particular collective investment scheme in Ireland is a suitable promoter of Irish domiciled schemes in the context of the reputation of the Irish Financial services centre. The CBI operates a reasonably strict policy in this regard.

First, it requires the proposed promoter to be regulated in its home jurisdiction. This enables the CBI to make contact with the home regulator and take comfort from the level of regulation and supervision there.

Secondly, the CBI requires that promoters have at least 635,000 euro in available financial resources.

In order to speed up the process of approval, the promoter can submit a fund ‘fact sheet’ to the CBI outlining the project plan. This affords the CBI the opportunity to review the proposal and pinpoint any areas of potential concern before time has been spent drafting the fund documentation and agreements.

Investment Manager approval
The CBI must approve the investment managers of all funds. Information must be submitted on company ownership, financial accounts and the value of assets under management. The managers must show experience in managing collective investment schemes and must demonstrate that they have the required expertise to manager the proposed portfolio, including a proven track record. They must also submit information on the regulatory body they are supervised by.

Fund approval process

As previously indicated, the CBI aims to strike the correct balance between safe-guarding Ireland’s reputation as a well regulated domicile in which to do business and facilitating speed of delivery of product to market. In this context, the CBI and the Dublin Funds Industry Association (DFIA) recently published a joint position paper on the authorisation of collective investment schemes. The purpose of this paper was to provide an improved framework for the authorisation of collective investment schemes. The CBI and the DFIA worked closely together, after talking to industry members and fund promoters, to present a paper that should result in increased efficiencies within the authorisation process. The authorisation process has been streamlined to facilitate the CBI to be in a position to issue first comments on standard applications within three weeks of receipt of submission. In the event that applicants quickly address comments, the new streamlined process will permit formal authorisation within eight weeks of submission.

Distribution of Irish domiciled funds

The introduction of the Ucits directive in 1985 heralded the vehicle that would facilitate the pass-porting of products domiciled in one member state throughout the Eurozone and Switzerland.

The introduction of Ucits enabled "harmonised" products to be marketed in other member states as a result of mutual recognition among supervisory authorities. Ireland was one of the first countries to adopt the Ucits directive and the establishment of a robust and effective regulatory framework has instilled a level of confidence in the authorisation of products in Ireland.

However, the single market still remains the holy grail. The lack of homogeneity in fund distribution can hamper true cross-border distribution. One of the main factors impinging cross border sales rests in the diverse range of registration requirements among different member states. This is an area that is demanding attention but the spotlight should further be thrown on this subject in order to harmonise the registration process across jurisdictions.

If a Ucits fund is to market its shares or units in a member state, other than the one in which it is domiciled, it must notify the competent authorities of the host country in advance as well as its own home country authorities. It must also provide the host countries supervisory authorities with:

A statement of compliance from the home country authorities that the fund fulfils the conditions laid down in the Ucits directive. The funds statutory documents (articles of association/incorporation).

A fund prospectus.
Where appropriate, the fund’s annual report.
A brief description of the marketing arrangements put into place.


However, the majority of countries pose additional information obligations to those stipulated in the 1985 directive both for obtaining initial registration to market the fund as well as for communicating information to investors. There is a lack of homogeneity in these additional requirements and consequently in the timeframes associated with achieving authorisation across jurisdictions.

As a result of the quagmire that surrounds fund distribution in Europe, some service providers offer to take the hassle out of the process and have built up specialist units to focus on the registration process. These units will project manage the registration process in the different jurisdictions and through the combination of expertise, local contacts and linguistic ability, manager to cut through the laborious process and achieve registration and consequently significantly improved speed to market than if the promoter is left to his own devises. In addition to this, they can manage the relationships in the local market and can become the link between the market and the local representatives.

The recent debacle surrounding the introduction of Ucits 3, again throws the spotlight on the protectionist stance adopted by some member countries.

However, in spite of the obstacles in place there are ways of circumventing the log jams and a number of the leading service providers have stepped in to fill the gap and provide value-added services to their clients in the form of promoter assistance re-registration of their products across Europe.

To keep in touch with the latest developments in the offshore world, check out the weekly news update on our website, http://www.blevinsfranks.com/

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