In our view, Ireland should avail of this discretion to extend the list of ancillary activities provided by an external AIFM to include benchmark administration in accordance with Regulation 2016/...
4. Public Consultation Questions - Discretion 1
Discretion 1 - Article 1(2) of Directive (EU) 2024/927
Article 1(2) of Directive (EU) 2024/927 amends Article 6 of Directive 2011/61/EU as follows:
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(2) Article 6 is amended as follows: (a) in paragraph 4, point (b), the following point is added: (iv) any other function or activity which is already provided by the AIFM in relation to an AIF that it manages in accordance with this Article, or in relation to services that it provides in accordance with this paragraph, provided that any potential conflict of interest created by the provision of that function or activity to other parties is appropriately managed.’; (b) in paragraph 4, the following points are added: '(c) administration of benchmarks in accordance with Regulation (EU) 2016/1011; (d) credit servicing activities in accordance with Directive (EU) 2021/2167 of the European Parliament and of the Council (*3). (*3) Directive (EU) 2021/2167 of the European Parliament and of the Council of 24 November 2021 on credit servicers and credit purchasers and amending Directives 2008/48/EC and 2014/17/EU (OJ L 438, 8.12.2021, p. 1).’;"(c) paragraph 5 is amended as follows: (i) point (b) is deleted; (ii) the following point is added: ‘(e) administration of benchmarks in accordance with Regulation (EU) 2016/1011 which are used in the AIFs that they manage.’; (d) paragraph 6 is replaced by the following: ‘6. Article 15, Article 16 except for paragraph 5, first subparagraph, and Articles 23, 24 and 25 of Directive 2014/65/EU shall apply where the services referred to in paragraph 4, points (a) and (b), of this Article, concerning one or more of the instruments listed in Annex I, Section C, to Directive 2014/65/EU, are provided by AIFMs.’ |
Article 6 is part of Chapter II of Directive 2011/61/EU dealing with the authorisation of an AIFM. Article 6 lays out the conditions for taking up activities as an AIFM. It states that Member States shall require that no external AIFM engage in activities other than those referred to in Annex I of the Directive and the additional management of UCITS subject to authorisation under Directive 2009/65/EC.
Article 6(4) contains a derogation from Article 6(2) allowing external AIFMs to be authorised to provide the following services:
- management of portfolios of investments, including those owned by pension funds and institutions for occupational retirement provision in accordance with Article 19(1) of Directive 2003/41/EC, in accordance with mandates given by investors on a discretionary, client-by-client basis;
- non-core services comprising:
(i) investment advice;
(ii) safe-keeping and administration in relation to shares or units of collective investment undertakings;
(iii) reception and transmission of orders in relation to financial instruments.
This discretion was exercised in full by Ireland in domestic legislation. Under Regulation 7(4) of the European Union (Alternative Investment Fund Managers) Regulations 2013, the Central Bank is permitted to assess and approve on a case-by-case basis any applications for authorisation it receives from external AIFMs seeking to provide these additional “top-up” services. [1] Regulation 7(5) provides that AIFMs cannot be authorised (i) to carry out “top-up” services only; or (ii) to carry out “non-core services” without also providing portfolio management services, as set out in Regulation 7(4)(a). External AIFMs can apply for authorisation to carry out these services either at the time they are seeking authorisation or separately post-authorisation.
Article 1(2) of Directive (EU) 2024/927 amends Article 6 of Directive 2011/61/EU to extend the list of ancillary activities provided by an external AIFM under the derogation to include:
- the administration of benchmarks;
- credit servicing activities.
It also clarifies that, as part of the “non-core services” offering, AIFMs are allowed to perform for the benefit of third parties the same functions and activities that they already perform in relation to an AIF, subject to the appropriate management of any potential conflicts of interest. These functions and activities may include corporate services such as human resources and information technology (IT), as well as IT services for portfolio management and risk management.
This national discretion has materially widened in scope as a result of the amendments in Directive (EU) 2024/927 and it is being addressed in this public consultation in line with the Department's transposition policy.
The possibility for external AIFMs to undertake these activities could maintain or increase, to some degree, the competitiveness of the jurisdiction vis-à-vis other investment funds centres of excellence.
If the discretion is exercised, it would fall to the Central Bank to assess and decide whether to permit an external AIFM to engage in these additional ancillary activities, should it receive any applications in this regard.
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Question 1. Should Ireland exercise this discretion to extend the list of ancillary activities provided by an external AIFM to include benchmark administration in accordance with Regulation 2016/1011/EU and credit servicing; and to clarify that “non-core services” under Article 6(4)(b) of AIFMD may include the same functions and activities already provided by AIFMs in relation to AIFs that they manage? |
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