Nicholas Blake-Knox
Partner
Ireland
On 9 September, the Central Bank of Ireland (Central Bank) published a public consultation (CP161) setting out a series of changes it proposes to make to the Central Bank UCITS Regulations and the Central Bank Guidance on performance fees for UCITS and certain types of Retail Investor AIFs (RIAIFs) (the Consultation).
The proposed amendments contemplated by the Consultation update the domestic regulatory framework applicable to UCITS and take account of policy developments since the current Central Bank UCITS Regulations were last published.
The Consultation has been published following the implementation, on 15 April 2024, of the Directive (EU) 2024/927 (AIFMD II) which amends the Directive (EU) 2009/65/EC (the UCITS Directive). The UCITS Directive was transposed into Irish law by S.I. No. 352/2011 (UCITS Regulations), providing the legislative basis for authorisation and regulation in Ireland, of Undertakings for Collective Investment in Transferable Securities (UCITS).
The Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2019, as amended (the Central Bank UCITS Regulations) supplement the UCITS Regulations and set out additional regulatory requirements and conditions imposed by the Central Bank on Irish domiciled UCITS, UCITS management companies and depositaries of UCITS.
What are the main changes being consulted on?
The Central Bank plans to repeal and replace the Central Bank UCITS Regulations to modernise and align with the updated European UCITS framework. These changes will:
- ensure alignment between the domestic UCITS rules and the revised EU framework
- update and streamline the domestic framework by incorporating outstanding updates from past consultations, clarifying provisions, embedding certain Q&As and guidance, and removing outdated rules
- revise key rules, specifically those relating to performance fees for UCITS and certain RIAIFs, as well as the operation of redemption gates for UCITS
We have set out below an overview of the key changes which are proposed in the Consultation, together with some commentary on the impact of the change, as well as details on other miscellaneous updates proposed.
Performance fees: Regulatory and guidance updates
The Central Bank proposes to revise the UCITS performance fee rules to align fully with ESMA Guidelines and improve fairness, transparency, and investor protection. Current restrictions in the Central Bank UCITS Regulations have limited full implementation of ESMA provisions.
The proposed reforms would:
- remove legislative barriers preventing full ESMA compliance
- allow shorter performance reference periods (less than full fund life) under conditions
- permit fulcrum or other symmetrical fee models with upward/downward adjustments allow more frequent fee crystallisation if linked to the full fund-life reference period
- consider permitting independent third parties (beyond the depositary) to verify fee calculations
Additionally, the Central Bank will amend the Central Bank UCITS Regulations to incorporate ESMA Q&A guidance on funds with multiple portfolio managers, ensuring consistency with the UCITS Directive.
Redemption gates
The Central Bank proposes removing the current rule that redemption gates may only be applied if redemption requests exceed 10% of UCITS units or net asset value. Instead, UCITS responsible persons would have discretion to set their own thresholds for imposing redemption gates, provided they comply with the broader UCITS framework.
Liquidity management tools (LMTs)
The Consultation proposes amending the Central Bank UCITS Regulations to align with AIFMD II by introducing harmonised rules on liquidity management tools (LMTs). UCITS funds must select at least two LMTs, disclosed in fund rules, to strengthen responses to liquidity stress. A new dedicated LMT section will set operational requirements and rules for LMT selection, side pockets, suspensions, swing pricing, and redemption gates. Administrative redemption charges and in-specie redemptions will not be treated as LMTs.
The Central Bank also proposes requiring UCITS to consider including at least one quantitative LMT (e.g., redemption gate, notice period extension) and one anti-dilution tool. UCITS must notify the Central Bank if LMTs disclosed in the prospectus are activated or deactivated outside the normal course of business.
Money market funds (MMFs) and money market instruments (MMIs)
The 2017 EU Money Market Fund Regulation (MMFR) created a dedicated regulatory framework for MMFs, replacing their prior treatment under UCITS rules. As a result, some UCITS provisions for MMFs are now redundant, and the Central Bank proposes deleting these obsolete rules from the UCITS Regulations.
Share class and ETF-specific provisions
The Central Bank proposes formally incorporating recent UCITS Q&A clarifications into the UCITS Regulations:
ETF naming: Q&A ID 1016, allowing ETFs to meet naming requirements at the share class level, will be integrated, and the Q&A deleted to avoid duplication.Disclosure documents: Regulation 85(2) and (3) will clarify that referenced documents include the UCITS KIID or PRIIPs KID, ensuring actively-managed UCITS ETFs can use the PRIIPs KID for compliance.
Share class dealing flexibility: While all share classes must generally have identical dealing procedures and frequencies, a derogation will be introduced for UCITS ETFs to accommodate operational differences (e.g., cash vs. in-kind subscriptions, hedged vs. unhedged share classes), formalising Q&A ID 1030.
Prospectus and disclosure enhancements
NAV based fees - The Central Bank proposes requiring UCITS prospectuses to disclose the maximum amount of recurring fees calculated on the fund’s NAV and paid from fund assets. This aims to enhance transparency and help investors make better-informed decisions.
Redemption in specie - Under the new approach, redemptions in specie will be permitted only for professional investors, where provided for in the prospectus, consistent with AIFMD II. This ensures that retail investors cannot be required to accept securities instead of cash when redeeming units. Such transactions will be subject to depositary approval of the asset allocation, ensuring appropriate oversight and investor protection.
Dealing - The Central Bank proposes clarifying prospectus disclosure requirements for UCITS dealing charges. UCITS must prominently disclose all dealing-related charges that protect fund value—such as anti-dilution levies, redemption fees, swing-pricing adjustments, or liquidity cost factors—aligned with the disclosure statement required under Regulation 62, ensuring full investor transparency.
EPM - The Central Bank proposes amending UCITS prospectus rules to improve clarity on efficient portfolio management (EPM). Instead of merely disclosing their “intentions,” UCITS must explicitly state the specific EPM techniques and instruments they may use, enhancing transparency and reducing ambiguity for investors and regulators.
Dealing - The Central Bank proposes clarifying prospectus disclosure requirements for UCITS dealing charges. UCITS must prominently disclose all dealing-related charges that protect fund value—such as anti-dilution levies, redemption fees, swing-pricing adjustments, or liquidity cost factors—aligned with the disclosure statement required under Regulation 62, ensuring full investor transparency.
EPM - The Central Bank proposes amending UCITS prospectus rules to improve clarity on efficient portfolio management (EPM). Instead of merely disclosing their “intentions,” UCITS must explicitly state the specific EPM techniques and instruments they may use, enhancing transparency and reducing ambiguity for investors and regulators.
Reporting and supervisory requirements
Monthly & quarterly returns - The Central Bank proposes replacing Regulations 51 and 52 on monthly and quarterly UCITS returns with a new rule requiring responsible persons to submit periodic returns and records as specified on the Central Bank’s website, giving flexibility to update reporting requirements.
Relationship with the Bank - It also confirms that each UCITS and sub-fund must designate and maintain a dedicated email address for correspondence with the Central Bank, monitored daily, with any changes promptly notified in writing.
Relationship with the Bank - It also confirms that each UCITS and sub-fund must designate and maintain a dedicated email address for correspondence with the Central Bank, monitored daily, with any changes promptly notified in writing.
Governance and management company requirements
Operating conditions - The Central Bank proposes to amend the Central Bank UCITS Regulations to include a new requirement for the UCITS management company to ensure sufficient resources are devoted to manage and monitor the services provided to every UCITS under its management.
Directors - The Central Bank proposes amendments to the Central Bank UCITS Regulations to clarify director-related obligations for UCITS management companies. Key changes include:
Directors - The Central Bank proposes amendments to the Central Bank UCITS Regulations to clarify director-related obligations for UCITS management companies. Key changes include:
- requiring written notification to the Central Bank when a director resigns, is removed, or otherwise ceases to serve;
- confirming that no individual may simultaneously act as a director of both a management company and its depositary for the same fund; and
- maintaining minimum residency requirements for directors and designated persons, with the Central Bank retaining discretion to impose additional residency conditions during authorisation.
Relationship with the bank - The Central Bank proposes requiring UCITS management companies to notify it of any situation or event that affects, or could affect, their ability to meet regulatory obligations or duties to the UCITS. This change is intended to remove ambiguity and ensure consistent application of notification requirements.
Key investor information - The Central Bank plans to amend Regulations 75–78 of the UCITS Regulations to align with the PRIIPs Regulation and related guidance. The goal is to ensure consistency with EU rules while clarifying UCITS managers’ obligations.
What are the next steps?
The Central Bank has indicated that this Consultation will run for an 8-week period until 5 November 2025. Stakeholders are invited to review and respond to the queries raised by the Central Bank in respect of the individual changes which are being proposed. Following the conclusion of the consultation, the Central Bank intends to publish a feedback statement, outlining the commentary received from stakeholders and setting out how the Central Bank propose to proceed in respect of the changes suggested.
Conclusion
The Consultation is a positive and welcome development from the Irish funds industry perspective as it offers clarification of a number of rules and streamlines their implementation across the various elements of the Irish UCITS framework such as the Central Bank UCITS Regulations and UCITS Q&A by removing ambiguity and obsolescence while ensuring alignment between the domestic UCITS rules and the revised EU framework.
We are monitoring these developments closely and have been actively engaged in industry discussions with the Central Bank in advance of the publication of the Consultation. We will provide further updates, at the appropriate time. Please do reach out to your usual Walkers contact if you need more information or wish to contribute a response to the Consultation.
Key investor information - The Central Bank plans to amend Regulations 75–78 of the UCITS Regulations to align with the PRIIPs Regulation and related guidance. The goal is to ensure consistency with EU rules while clarifying UCITS managers’ obligations.
The Central Bank has indicated that this Consultation will run for an 8-week period until 5 November 2025. Stakeholders are invited to review and respond to the queries raised by the Central Bank in respect of the individual changes which are being proposed. Following the conclusion of the consultation, the Central Bank intends to publish a feedback statement, outlining the commentary received from stakeholders and setting out how the Central Bank propose to proceed in respect of the changes suggested.
Conclusion
The Consultation is a positive and welcome development from the Irish funds industry perspective as it offers clarification of a number of rules and streamlines their implementation across the various elements of the Irish UCITS framework such as the Central Bank UCITS Regulations and UCITS Q&A by removing ambiguity and obsolescence while ensuring alignment between the domestic UCITS rules and the revised EU framework.
We are monitoring these developments closely and have been actively engaged in industry discussions with the Central Bank in advance of the publication of the Consultation. We will provide further updates, at the appropriate time. Please do reach out to your usual Walkers contact if you need more information or wish to contribute a response to the Consultation.
