Association of Compliance Officers Ireland

Transcription

1 Association of Compliance Officers Ireland Investor Money Regulations Kieran Fox Business Development Director Irish Funds May 24 th

2 Background Funds industry began preparing practice notes 2010 CBI taskforce August 2011 to look at client assets First meeting with CBI Nov 2011 March 2012 taskforce publishes Review of the Regulatory Regime for the Safeguarding of Client Assets. 2

3 Background March 2012 taskforce publishes Review of the Regulatory Regime for the Safeguarding of Client Assets However FSPs do receive, hold and pay out un-invested cash in DDA accounts. Monies held in these accounts are normally held for less than a day but can be there for up to five days and longer in exceptional cases. These monies are client assets within the meaning of the CAR. The CAR apply to the operation of these accounts but for various reasons, principally the impracticability of their application, they are not in fact applied by any of the FSPs who operate these accounts. We regard this lacuna as unsatisfactory It is undesirable that no appropriate requirements to safeguard client assets are imposed at this stage of the process. This should be resolved We therefore recommend that a practicable and relevant regime, which draws on best practice, should be developed specific to the operation of DDA accounts. This should be progressed in consultation with the FSPs.

4 Background Intensive period of engagement with funds industry and client asset team at CBI during 2014 Irish Funds legal advice on treatment of subscription money received after dealing day but before settlement day- June 2014 Funds specific Investor Money Regulations March 2015 Discussions continue on fund asset model where assets in a subs / reds account are owned the fund and not an FSP Fund Assets Umbrella cash accounts guidance Dec 2015 Engagement between industry and Central Bank continue 4

5 Key points of IMR The six core principles of the regulations are: Segregation Designation Reconciliation Daily Calculation Risk management Investor money examination Investor Money Management Plan (IMMP) Head of Investor Money Oversight (HIMO PCF 46) 5

6 Areas covered by umbrella cash accounts guidance General principles When is it not appropriate to operate an umbrella cash account Policies and procedures Disclosure to investors Treatment of monies in umbrella cash accounts Insolvency of one sub-fund within an umbrella fund 6

7 7 Model I Overview

8 8 Model II Overview

9 9 Model III Overview

10 Wrap up Investor Money Regime (IMR) goes live July 1 st 2016 A lot of preparation required e.g. including systems, procedures, accounts, structures, PCF 46 (head of investor money oversight). IMR applicable to only sub / reds (or similar) money held in investor money account (owned and controlled by an Irish FSP) Possible to have subs / reds accounts that are assets of the fund and not within the scope of IMR This can be at sub fund level, or an umbrella level, contractually settled or cleared funds basis 10

11 Questions & Thank you Questions? Thank you 11

12 Notes to models I III (Slides 6,7,8) This presentation shows 3 potential models for subscription and redemption money flows designed to achieve adherence to the Investor Money Regulations. These models are intended to cover the main features of the models being devised by different Fund Service Providers (FSP)s. Details will vary from FSP to FSP and in some cases additional collection accounts and slightly different flows may be put in place by certain administrators according to their specific reconciliation processes. Some indication of possible variations have been included. It should be noted that a single FSP may operate different models for different funds (e.g. one model for contractual settlement fund and one model for actual cash funds). Definitions Contractual Settlement Funds / Credit Dealing funds Deals are placed prior to receipt of monies i.e. normal settlement is after the trade being placed. Contractual Settlement Date (CSD) For credit dealing funds the normal settlement date when money is due from the investor and should be paid onto the Sub Fund (Commonly T+3). T Settlers Investors who pay early between T and CSD-1 on a Credit Dealing Fund. Cleared Money Funds / Non-Credit Dealing Funds Deals are only placed on confirmation of monies received. IM Investor Money Blocked Investor Payments Redemptions or Dividend payments that are withheld past normal settlement or pay date due to issues related to AML, Sanctions, Court Orders or inadequate payment instruction. Creations Amount due to fund for units created for a trade date Liquidations Amount due from fund for units redeemed for a trade date. Assumptions 1) While the regulations do not specify the timing of the classification of redemptions and dividends as fund assets or investor money. The assumption is Redemptions are deemed a Fund Asset until settlement date. Dividend deemed a Fund Asset until pay date. 2) Investor Subscriptions can be moved from an Investor Money account to a Fund Asset account prior to trade date if required under a funds terms and conditions and in compliance with and investors irrevocable instruction to invest. 3) A key assumption of several proceeding models is that subscription / redemption accounts can operate at an umbrella level as fund assets and not be subject to the Investor Money Regulations 12

13 Association of Compliance Officers Ireland Investor Money Regulations Kieran Fox Business Development Director Irish Funds May 24 th