Keeping in touch with Carne: find out what is happening around the funds industry and get the latest updates from the experts.

New challenges for Irish MLROs and Fund Boards

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Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) compliance has been rising up the regulatory agenda for Irish funds.  AML / CFT was listed by the Central Bank of Ireland (CBI) as an enforcement priority for 2014 and 2015 and with a FATF review of Ireland set to take place in 2016, this looks likely to continue. With more focus than ever before on AML / CFT compliance within the Irish funds sector, we asked Carne’s Dave Burns to shed some light on several current AML / CFT issues for Irish funds.

What is the role of an MLRO?

There is a regulatory requirement in Ireland for Designated Persons (including funds) to appoint an MLRO. The MLRO is responsible for suspicious activity reporting (SARs) to the Irish Police and the Revenue Commissioners (the authorities) and acts as a liaison between the Designated Person and the authorities. The MLRO is responsible for receiving information from any party that might indicate possible suspicious transactions and processing that information accordingly. Read More…

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Carne names Steve Bernat as new CEO of Luxembourg business

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Steve Bernat joins Carne from Lemanik to strengthen independent management company business in Grand Duchy.

Carne Group, the leading global provider of independent governance solutions for the asset management industry, is pleased to announce the appointment of Steve Bernat as the new CEO of its Luxembourg office. Steve joins Carne from Lemanik Asset Management in Luxembourg and brings with him over 17 years of experience in the Luxembourg asset management industry.

Steve was responsible for developing Lemanik’s management company business. He was a member of Lemanik’s Executive Committee, responsible for business development, marketing and distribution services. As a consequence, Steve is extremely familiar with developing fund distribution support solutions for Luxembourg funds using a local management company structure.

Steve has also worked with Citibank’s Securities and Fund Services division, where he held positions within operations, product management and business development. Prior to that he was employed by State Street Bank / IFDS, and Linedata Services. Between 1998 and 2001 Steve was a team leader with Activest, now Pioneer Asset Management.

Said John Donohoe, CEO of Carne Group: “Steve will be overseeing the ongoing development of our already considerable Luxembourg operation, including the growth of our independent UCITS and AIFM-licensed management company and associated risk management and distribution support. Luxembourg will continue to play a key role in the overall global governance and oversight service we deliver to our clients.”

Steve Bernat commented: “Luxembourg is a critical platform for global asset managers seeking serious, institutional-grade solutions for cross-border distribution. Carne’s brand as a provider of governance excellence is already well established globally, and I’m excited to be given the opportunity to help with delivering that service to Luxembourg funds.”

Carne established its office in Luxembourg in 2006. Since then the firm has expanded to over 20 people in Luxembourg, including support personnel for an independent UCITS and AIFMD-authorised management company and now services in excess of €20 billion in fund assets.

For more information on Carne’s governance and distribution support services for Luxembourg funds, please contact Steve Bernat – steve.bernat@carnegroup.com or call +352 2673 2333.


Hedge fund Harness uses Carne to support launch of Luxembourg UCITS

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Harness draws on Carne’s management company, independent directors and project management services in launch of UCITS forex fund.

LUXEMBOURG, May 2015: Carne Group, the leading global provider of governance and oversight services to the asset management industry, has been chosen by Harness to provide an independent management company solution for its new Luxembourg UCITS fund.

Harness is making use of Carne’s independent UCITS compliant management company in Luxembourg to support the launch. In addition Carne is also providing two independent directors to the Board of the SICAV. Harness and Carne worked together on project managing the successful launch of the fund; Carne liaised with the Luxembourg regulator and helped to manage the approvals process.

Harness was established in 2009 as a specialist asset manager. The firm’s objective is to deliver absolute returns within the global macro space through a fundamental discretionary strategy, focusing exclusively on foreign exchange. The group’s approach integrates qualitative analysis, in-house macro-economic research and investment regime assessment with quantitative factor analysis.

Harness has developed a number of investment vehicles and separate accounts through which it expresses its investment philosophy, however it offers only one investment strategy.

The group oversees in excess of US$740 million in absolute return mandates with foundations, family offices, banks, pension funds and asset management companies. Philippe Peress is the founder and Principal of Harness Group. The Group is controlled and owned by the principal’s family.

Martin Burke, Product Specialist of Harness Investment Group Ltd, commented: “We are pleased to have been able to work with a firm of Carne’s experience and professionalism in what has been a successful fund launch. Carne came recommended by some of our key partners at Harness and have delivered to high expectations. Their deep understanding of the regulatory and oversight requirements in launching UCITS product has played a valuable role in the launch of our fund.”

Aymeric Lechartier, Managing Director with Carne, added: “For a sophisticated fund of this nature, it is important to have a partner who can help with the sometimes quite complex regulatory and operational requirements entailed by current UCITS regulations. Carne is an established provider of Luxembourg governance and registration solutions with the extensive service provider network that can facilitate a smooth approval and launch process for both UCITS and AIFMD funds.”

Carne is a provider of Luxembourg governance solutions including UCITS and AIFMD management company services, independent directors and conducting officers.

For more information on Carne’s solutions for Luxembourg funds, please contact Aymeric Lechartier – aymeric.lechartier@carnegroup.com


Central Bank of Ireland Report on Anti-Money Laundering/Countering the Financing of Terrorism and Financial Sanctions Compliance in the Irish Banking Sector (the “Report”)

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The Central Bank of Ireland recently published a report on Anti-Money Laundering/Countering the Financing of Terrorism (“AML /CFT”) compliance following its AML themed inspections in the Irish banking sector. Whilst the banking sector in Ireland is the focus of the report, the report states “many of the issues raised are relevant to the broader financial services sector in Ireland”. The report further states that the “Central Bank expects all financial and credit institutions to carefully consider the issues raised in the Report, and to use the Report to inform the development of AML/CFT and Financial Sanctions frameworks”. Whilst a fund industry specific report is expected, no clear timeframe has yet been communicated. Outlined below are some of the key themes from the report that will be of interest to the Funds industry.

Whilst a number of the issues highlighted are not strictly legislative requirements, the report gives an insight into what the Central Bank considers to be best practice in the industry. Financial services firms in Ireland would therefore be advised to assess their existing AML programs against the report and address any identified deficiencies as the points raised in the report are likely to form a basis for future Central Bank AML themed inspections. Read More…


Cayman Islands Court of Appeal ruling on Weavering Case

 

Post-Weavering governance reforms have changed the face of fund oversight

The Cayman Islands Court of Appeal has recently found that the directors of the failed Weavering fund (Weavering Macro Fixed Income Fund Limited vs Stefan Peterson and Hans Ekstrom) could not be found liable for wilful default due to insufficient evidence placed before the judge in the original case. However, this is unlikely to affect the expectations of Cayman courts and regulators regarding the standards now established for Cayman fund boards.

Although it did not create any new law, the original Weavering case has prompted substantial improvements in the overall standard of Cayman Islands fund governance and allocators are now much more sensitive to ‘red flag’ exemption clauses in articles of association. Consequently, directors of fund boards will need to adhere to the best practice standards established by the case and reinforced by guidance issued by CIMA in its wake. Read More…


Key features of the new Irish ICAV structure

The ICAV is likely to become the structure of choice for Irish funds

The much anticipated Irish Collective Asset Management Vehicle (“ICAV”) legislation has now been passed into law by the Irish Parliament. The ICAV is a bespoke corporate vehicle for investment funds in Ireland. It is likely to become the vehicle of choice for those seeking to establish funds in the country.

While the variable capital company (“VCC”) will remain available to promoters setting up funds in Ireland, the ICAV has a number of features which set it apart from the plc. The legislation also makes it possible for existing VCCs to transition to the ICAV structure and provision is made for the redomiciliation of foreign investment funds into Irish ICAVs.

Key Features of the ICAV

Check the Box

One of the primary benefits of the ICAV is that it will ‘check the box’ for US tax purposes.

Currently an Irish fund structured as a plc is treated as a per se corporation for US tax purposes and therefore cannot “check the box” in order to be treated as a transparent entity for US tax purposes. This has resulted in both the fund and the investor being treated as taxable persons from the US tax perspective. The ICAV will be an eligible entity for the purposes of “checking the box”.

Streamlining of company law requirements
Investment funds structured as plcs are subject to a number of company law requirements which are viewed as inappropriate for investment funds and the ICAV will not be subject to these requirements. The main amendments include:

  • Making the Central Bank of Ireland the competent authority for the incorporation of the ICAV
  • Removal of the requirement to operate on the principle of risk spreading
  • Removal of the requirement to have an annual general meeting
  • No requirement to receive shareholder approval to amend the instrument of incorporation where the depositary is satisfied that such amendment is not prejudicial to shareholders and the amendment is not one which the Central Bank requires to be approved by shareholders
  • Permitting annual financial statements to be prepared at individual sub-fund level

Plus ça change plus c’est le même chose
While the ICAV contains a number of benefits over the VCC regime many of the key governance structures which made VCCs so successful have been retained. The ICAV will have a board of directors who will be responsible for its governance, its shares may be listed on a stock exchange and it may be self-managed or appoint a management company.

From a prudential perspective it will be regulated in the same manner as a plc or unit trust under the UCITS Notices or AIFM Rulebook by the Central Bank. The Central Bank authorization process will remain largely the same.

Next Steps
The Central Bank has advised it will be in a position to shortly commence reviewing applications for authorization from ICAVs and it is likely that the first ICAVs will launch in a matter of weeks. We would expect that the transition provisions will be attractive for plcs who wish to receive investment from US investors with others waiting to see the lay of the land before deciding on whether to transition to the new regime. The redomiciliation regime is also likely to be attractive to promoters looking to consolidate their existing EU fund range or to redomicile into the EU.

How Carne can help
Carne is the leading supplier of governance services to Irish Funds. Carne will be able to offer the following services to ICAVs


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