CP152 – New ManCo Capital requirements ?

Author: Clerkin Lynch

Date Published 05/12/2022

CP152 – New ManCo Capital requirements ?

A new consultation paper (“CP”) has been issued by the Central bank of Ireland (the “CBI”) in relation to the potential introduction of new own funds requirements for UCITS Management companies and AIFMs authorised to provide discretionary portfolio management and additional non-core services.

At present the own funds requirements for UCITS Management Companies and AIFMs are set out in Regulation 17 of S.I. No. 352 of 2011 (the UCITS Regulations) and Regulation 10 of the S.I. No 257 of 2013 (the AIFM Regulations), respectively.  Under these regulations the level of own funds required to be held by such firms is directly proportional to the level of collective assets held. 

However, UCITS ManCos and AIFMs may be authorised under Regulation 16(2) of the UCITS Regulations and Regulation 7(4) of the AIFM Regulations, respectively, to also provide discretionary portfolio management services and additional non-core services and this has become increasingly common in particular post Brexit. 

Investment firms authorised to provide discretionary portfolio management services under S.I. No. 375 of 2017 (MiFID) are subject to own funds requirements under Regulation (EU) 2019/2033 (IFR) but these do not currently apply to UCITS ManCos and AIFMs providing these services and they are not otherwise subject to additional own funds requirements at EU level related to the provision of such services. 

Therefore, to align these requirements the Central Bank is proposing to introduce bespoke new capital requirements. This will be achieve through Central Bank regulations and the imposition of a new condition on authorisation. 

There will be an exemption for UCITS ManCos and AIFMs authorised to provide discretionary portfolio management services and non-core services that constitute “small and non-interconnected firm” (modelled on similar conditions under the IFR). However, otherwise such firms will be required to apply the higher of the own funds requirement under the UCITS Regulations/AIFM Regulations as applicable, or, a Risk to Client K-factor own fund requirement modelled on the Risk to Client K-Factor applicable to MiFID investment firms under the IFR.