Minister of State Simon Harris Addresses the Irish Funds Annual Conference, 11 June

2015

In his keynote speech at today's Irish Funds (IF) Annual Global Funds Conference in Dublin, Irish

Minister of State with responsibility for International Financial Services Simon Harris re-iterated the

Irish Government's support and commitment to the Irish funds industry, and he highlighted its recently

published strategy paper for the Irish international financial services sector, IFS2020.

Reflecting on Ireland’s position as the fastest-growing economy in the EU last year, and the European

Commission’s forecast for the same again this year, Minister Harris noted that the decision to

establish or service an investment fund in Ireland is based on a unique combination of the Irish legal

and regulatory system, the specialist skills and expertise of its workforce, a pro-business approach,

infrastructure, tax environment and government support.

Commenting on the importance of Ireland's competitive offering, Minister Harris emphasised that

IFS2020 recognises the importance of building on Ireland's existing strengths in talent, technology,

innovation and excellent client service, while focusing on capturing new opportunities in a changing

market and embracing the highest forms of governance.

Central Bank Update

Mr Gareth Murphy, Director of Markets Supervision at the Central Bank of Ireland, also spoke at

today's conference on a number of matters including corporate governance, the NAV calculation

process, the AIFMD third country passport, Capital Markets Union and market finance. With respect

to aspects of fund corporate governance, the Central Bank has decided not to impose a hard limit on

the number of Irish resident board directorships which an Irish resident director may hold.

Instead, the Central Bank will apply a two-staged assessment: where an individual director has an

aggregate professional time commitment in excess of 2,000 hours per year, the Central Bank will then

consider whether there are 20 or more directorships being held. Pursuant to the Central Bank’s risk-

based approach, where this two pronged assessment indicates that fund governance standards on the

relevant boards may be undermined, this will attract additional Central Bank supervisory attention.

Mr Murphy noted that the Irish funds industry has a substantial population of over 2,000 active

directors with a broad range of expertise and that, amongst this population, there is a strong level of

commitment to pursue high ethical standards and directorial responsibility.

The Central Bank intends to issue further guidance on directorships in the coming days, and

Matheson will keep you updated. In addition, Mr Murphy confirmed that the Central Bank will provide

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feedback on the consultation on fund management company and self-managed investment company

effectiveness (“CP86”) which issued in September 2014 regarding control over the activities of

delegates and corporate governance. In advance of this, Mr Murphy confirmed today that the

following points will be published in the CP86 feedback statement:

the Central Bank will clarify the meaning of the designated person role - a fund governance

concept which has been in existence since 2003 but which has evolved as a result of

regulatory change and industry practice; in particular, the Central Bank will make it clear that

designated persons are responsible for managerial functions in the fund management

company; and

the Central Bank will confirm that these managerial functions have been streamlined to six key

areas covering (i) investment portfolio management, (ii) investment risk management, (iii)

distribution, (iv) operational risk, (v) capital and financial management and (vi) compliance.

After careful consideration, the Central Bank has decided that the “organisational

effectiveness” role which was consulted on will not be a managerial function, but rather is a

task that must be performed by one of the independent directors.

ETFs and Other Developments

In relation to other developments and areas of key focus at today’s Irish funds industry annual

conference, Exchange Traded Funds (ETFs) were topical, with Matheson partner Philip Lovegrove

chairing a panel on regulation of the ETF industry in Europe and Ireland. The panel discussed the key

aspects of financial regulation which will impact the rapidly growing ETF space, noting that, as the

presence of ETFs within investment management expands, there is an increasing tendency for major

pieces of broad market legislation, such as MiFID II, to address certain aspects of ETFs. The panel

also considered Stock Connect in the context of ETFs.

In attendance was Matheson partner Tara Doyle, an elected member of the governing Council of the

Irish Funds Industry Association (IFIA). Tara welcomed the formal announcement this morning that

the IFIA will from now on be known as "Irish Funds", with a new website launched which may be

accessed here.

Matheson would be happy to discuss any aspect touched upon in this summary with you in further

detail. Should you have any enquiries generally regarding the Irish legal regulatory requirements

applicable to the corporate governance for fund management companies, or in relation to investment

funds, please get in touch with us.

Full details of the Asset Management and Investment Funds Group, together with further updates,

articles and briefing notes written by members of the Asset Management and Investment Funds team,

can be accessed at www.matheson.com.

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aspect of the themes and subject matter discussed, nor is it intended to provide, and does not

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