The Legal 500

by Frank O'Reilly, Partner

The High Court has set down its position in relation to funding arrangements with court-appointed liquidators.

In line with EU-mandated requirements, Ireland has introduced new rules governing acquisitions, in whole or in part, of certain regulated financial institutions.

The EU Takeovers Directive (2004/25/EC) (the “Takeovers Directive”) has been transposed into Irish law by the European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations, 2006 (S. I. No. 255 of 2006) (the “Takeovers Regulations”). The stated aim of the Takeovers Directive is to strengthen the Single Market in financial services by facilitating cross-border restructuring and enhancing minority shareholder protection. Many of the provisions of the Directive are already contained in the existing Irish regime for the supervision of takeovers set out in the Irish Takeover Panel Act, 1997 (the “Act”), the Takeover Rules, 2001 (the “Rules”) and the Companies Acts 1963 – 2005, which will continue to apply. The Takeovers Regulations cater for those areas not already dealt with in the existing regime or areas of the regime that needed to be adjusted as a result of the requirements of the Takeovers Directive.

The issuing of securities of offshore funds for public sale into Japan is governed by a combination of the Securities and Exchange Law of Japan (the "SEL") which is enforced by the Japanese Ministry of Finance ("MOF"), the Law Concerning Investment Trust and Investment Company of Japan (the "Investment Funds Law") which is enforced by the Financial Services Agency of Japan ("FSA").Establishing a Retail Fund in Ireland for sale in Japan Fund Structures and Features

The purpose of this Article is to consider the implications of the recent English case of The Russell Cooke Trust Company Limited and Elliott1. Following this case, insolvency practitioners, preferential creditors, and third parties dealing with a company in the belief that its assets are subject to a floating charge (rather than a fixed charge) will need to examine the substance of the charge before dealing with those assets.

The Finance Bill 2008 (as initiated) was released yesterday 31st January 2008 and there have been some welcome amendments included to assist the funds industry in administering the 8 year deemed disposal rules.

The Irish Funds Industry Association has announced this afternoon a hugely significant and extremely positive change in the authorization process for Irish domiciled qualifying investor funds (“QIFs”).

The QIF authorization process, as well as its product parameters, are to be changed to accelerate the time to market and otherwise improve the attractiveness of the QIF product.

QIFs will now be capable of being authorised by the Financial Regulator on a filing only basis which will mean that there will no longer be a prior review of QIF fund documentation and a QIF meeting the preagreed parameters can file for authorization on Day X and authorization will issue on Day X+1.

The Financial Regulator is an Irish statutory body established by the Central Bank and Financial Services Authority of Ireland Act, 2003 (“the Act”). The Act sets out inter alia the powers and duties of the regulator in respect of the authorization and supervision of financial service and insurance service providers.

The Irish funds industry has over the past twenty years established itself at the forefront on the global funds industry. Ireland is one the few locations worldwide where investment funds are established, managed and serviced in a regulated environment. The wide range of fund structures available in Ireland has facilitated the growth of the industry and US$1.2 trillion worth of assets are currently administered in Ireland.

The financial services sector has over the past twenty years been one of the pillars of the Irish economy while it has enjoyed unprecedented growth. Since its inception the investment funds industry alone has funds under management with a net asset value in excess of one trillion Euro. Having experienced 35% growth in 2005 and in excess of 20% during 2006 the growth is set to continue during 2007. There are currently over 9,000 people employed in the investment funds industry in Ireland and this combined with increased employment levels in other financial services areas reaffirms the importance of the sector to the Irish economy.

There have been a number of significant international developments since last year including the publication in July, 2006 of the Report of the Alternative Investment Expert Group (the “Expert Group’s Report”) under the auspices of the European Commission as envisaged by its Green Paper on the Enhancement of the EU framework for Investment Funds published in July, 2005, the decision of a U.S. federal appeals court to strike down the SEC’s Rule 203(b)(3)-1(d) containing the “hedge fund amendments” to the Investment Advisors Act, 1940, and recent market data released showing the state of health of the hedge fund industry as a whole.

With some overlapping between the Capital Requirements Directive (CRD) and the Markets in Financial Instruments Directive (MiFID) credit institutions and investment firms have the opportunity now to minimise duplication of compliance measures by identifying the common requirements, revising their internal governance framework accordingly and consequently improving their governance cohesion and reducing costs, write Paula Kelleher and Shane King.

This paper, whilst addressing a number of recent product development issues specific to the Irish funds regulatory regime for real estate funds and CCFs, has as its focus on what I consider to be the main issue facing the Irish and broader European funds industry; cross border distribution.

Although principally considering the position for UCITS, I have also touched on the most recent proposals put forward as a solution to the fragmented state of the European hedge funds industry.

The Investment Funds, Companies and Miscellaneous Provisions Acts 2006 (the “2006 Act”) became law on 24 December 2006.

The Irish company law statutes are now collectively referred to as the Companies Acts 1963 to 2006.

Liability Driven Investment – Start with the desired investment outcome and figure out how to get there

In the last couple of years we have seen a number of collective investment schemes which have been authorised by the Financial Regulator that either describe themselves as liability driven investment funds or life-cycle funds. These schemes are designed either for individual investors who are able to identify an approximate “target date” when they expect to need to withdraw substantial portions of their investment or institutional pension fund investors who wish to see a suite of funds with a range of maturity dates catered for in the overall offering.

The EU Market Abuse Directive, implemented in Ireland on 1 July, 2005 by the Market Abuse (Directive 2003/6/EC) Regulations (the “Regulations”), imposes significant obligations on all listed issuers (both Irish and overseas) whose securities or instruments are listed on the Irish Stock Exchange (“ISE”). The Regulations strengthen and extend the existing Irish Stock Exchange rules relating to inside information. They also create a new offence of market manipulation.

The Irish Financial Services Regulatory Authority (“Financial Regulator”) currently permits money market funds (UCITS/non-UCITS) to provide for the use of an amortised cost valuation methodology. The Financial Regulator proposes to establish new conditions under which a money market fund is permitted to follow an amortised cost valuation methodology and to use the words “money market fund” in its title. The requirements imposed by the Financial Regulator as regards the use of an amortised cost valuation process are currently set out in Guidance Note 1/00 (Valuation of Assets of Collective Investment Schemes). These are intended to be replaced by the new Guidance Note - /08 (Valuation of Assets of Money Market Funds).

There have been a number of significant international and Irish legal and regulatory developments since July 2007 in the financial services arena. A number of these developments stem from the continued movement at EU level towards the integration of European financial markets as envisaged by the Financial Services Action Plan, whilst a number of these developments are domestic in nature albeit arising from international market developments (for example, the regulation of non-deposit taking lenders engaged in retail lending in Ireland arising from concerns over defaults in the sub-prime mortgage sector).

The Personal Injuries Assessment Board (“PIAB”) is a statutory body, which came into force under the Personal Injuries Assessment Board Act, 2003, (“PIAB Act”). The PIAB Act has commenced in its entirety since the 22nd July 2004. PIAB, together with the Civil Liability and Courts Act, 2004, (the “2004 Act”) which was brought into effect on the 20th September 2004, have changed practice and procedure in civil actions in Ireland.

The Investment Funds, Companies and Miscellaneous Provisions Act, 2005 (hereafter referred to as the “2005 Act”) was signed into law on 30th June, 2005.

Given the contributing role regulation may have on the competitiveness of the funds industry in Ireland and consequently its reputation, what is the regulatory outlook for 2007 and can we expect a measured approach from the Financial Regulator resulting in a positive impact on the Irish funds industry?

The European Communities (Reinsurance) Regulations 2006 (the “Reinsurance Regulations” or “Regulations”), which give effect to Directive 2005/68/EC (the “Directive”), came into effect on 15 July 2006. The Reinsurance Regulations, under the supervision of the Irish Financial Regulator (the “Financial Regulator”) establish a new regulatory framework for the authorisation and regulation of reinsurers and provide a separate regime for ‘special purpose reinsurance vehicles’ (“SPRVs”) whilst imposing particular requirements for the carrying on of ‘finite reinsurance’. Those familiar with the regulatory regime for non-life insurers will find similarities in the approach taken with the Reinsurance Regulations as the latter are largely based on the non-life insurance regime.

The last number of years has witnessed an increased interest in both Sharia Funds and in Islamic financial products worldwide. Sharia Funds are funds which are deemed to be compliant with an Islamic branch of law based on the teachings of the Koran and Sunna.

The provisions of the Pensions Act, 1990 (the “Pensions Act”) were amended by the provisions of the Social Welfare and Pensions Act, 2005 (the “2005 Act”) which was passed into law in March 2005.

The Transparency Directive (2004/109/EC) (the “TD”) was implemented into Irish law on 13th June 2007 by the Transparency (Directive 2004/109/EC) Regulations 2007 (the “Regulations”) and has effect from this date. The TD seeks to enhance transparency in EU capital markets in order to improve investor protection and market efficiency. The Regulations establish disclosure requirements on an ongoing basis for issuers with securities admitted to trading on a regulated market situated or operating within the EU.

Credit unions are recognised as non-profit organisations with the principal activities of accepting shares and deposits from members, providing savings facilities and making loans available to their members at reasonable rates of interest. They are considered to be the people’s bank of choice and in the past have assisted those who may have found it difficult to get a loan from the larger banking institutions indeed this is a valuable service they still provide today. The larger credit unions are steadily expanding their range of activities from the fundamental facilitation of savings and loans and into the mainstream financial services sector.

The Financial Regulator issued a revised policy note on October 5, 2007 in relation to physical short selling by UCITS.

On the 5th of April, 2007, Noel Ahern T.D., Minister of the Department of Community, Rural and Gaeltacht Affairs, announced that the Charities Bill 2007 had been approved by the Government. The Bill, once passed, together with certain existing legislation, will establish a new statutory regime for Charities in the State. In addition, for the first time in Irish law, a Charities Authority will be established, which will oversee the new regime. It is anticipated that the Bill will lead to greater transparency and accountability for the public and for charitable organisations. Some of the key features of the Charities Bill 2007 are set out and discussed below.

In the context of investment fund products, asset pooling is not a new concept. For many years asset managers have been offering pooled investment products to their clients, such products including US mutual funds, European UCITS, UK OEICs, etc, as a means whereby investors of varying types and sizes could invest on a collective basis in a pool of underlying assets with the aim of benefiting from centralised, professional asset management services and specialist fund administration and custody services with the perceived additional benefits of cost savings across these various services as a result of economies of scale.

On 15 October 2008, the Luxembourg Parliament adopted a law which changes certain aspects of the Law of 15 June 2004 relating to the investment company in risk capital (SICAR) as amended (the "SICAR LAW"). This new law seeks to further adapt the SICAR to the needs of the private equity community.

Following a process of consultation between the Irish Financial Regulator and the Irish Funds Industry Association (“IFIA”), a number of important positive changes have now been introduced to the regime for the authorisation and regulation of Qualifying Investor Funds (“QIFs”).

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Following a process of consultation between the Irish Financial Regulator and the Irish Funds Industry Association (“IFIA”), a number of important positive changes have now been introduced to the regime for the authorisation and regulation of Qualifying Investor Funds.

Newsletter - January 2007 - please download here...

INVESTMENT FUNDS

UNDERTAKINGS FOR COLLECTIVE INVESTMENT IN TRANSFERABLE SECURITIES (

II THE FINANCIAL REGULATOR FIT AND PROPER TEST

The Financial Regulator issued a consultation paper (CP11) on proposals for a common fit & proper test for directors and managers (hereinafter referred to as "Approved Persons") of all financial services firms in February 2005.

CAPITAL MARKETS UPDATE INVESTMENT FUND ISDA DEFINITIONS

INVESTMENT FUND ISDA DEFINITIONS

The International Swaps and Derivatives Association (?ISDA?) has announced the publication of the 2006 ISDA Fund Derivatives Definitions. The Definitions are intended for use in confirmations of derivatives transactions linked to interests in various types of collective in-vestment schemes, such as hedge funds and mutual funds, for which a liquid secondary market may not exist.

V EUROPEAN LAW UPDATE

MARKETS IN FINANCIAL INSTRUMENTS DIRECTIVE

The Markets in Financial Instruments Directive (?MiFID?) (2004/39/EC) aims to substantially expand and improve the provisions set out in the existing Investment Services Directive (93/22/EEC), which it will replace. The aims of MiFID are to protect investors, ensure market transparency and integrity, provide for management of conflicts of interest, impose best execution obligations on authorised firms and set out new rules on providing investors with an order execution policy.

IINTRODUCTION
In December 2005, the European Commission (the “Commission”) published its White Paper entitled “Financial Services Policy 2005-2010” following extensive consultation with industry and the other main European organs.

Introduction

The provisions of the Pensions Act, 1990 (the “Pensions Act”) were amended by the provisions of the Social Welfare and Pensions Act, 2005 (the “2005 Act”) which was passed into law in March 2005.