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Funds Update - Ireland
Quarterly Update | April - June 2015

1 Legal & Regulatory

1.1 AIFMD Update

1.2 Irish Collective Asset-Management Vehicle Act 2015

1.3 UCITS: Update

1.4 Companies Act 2014

1.5 Fund Management Company Boards

1.6 Money Market Funds: Update

1.7 EMIR Update

1.8 Corporate Governance Requirements for Investment Firms

1.9 MiFID II/MiFIR

1.10 PRIIPs KID Regulation

1.11 European Venture Capital Funds and Social Entrepreneurship Funds

1.12 CSDR

1.13 Market Abuse and Criminal Sanctions

1.14 Benchmark Regulation on Indices

1.15 ELTIF Regulation Finalised

1.16 Review of Draft RTS under CSDR, UCITS V, MAR, MiFID II, MiFIR and Transparency Directive

1.17 IFIA Guidance Paper on Connected Party Transactions and Depositary Obligations

1.18 AIMA: Due Diligence Questionnaire and Fund Directors Guide

1.19 EU Capital Markets Union

1.20 Client Assets and Investor Money Regulations

1.21 Securities Financing Transactions Regulation

1.22 Investment Funds Statistics: Q1 2015

1.23 Anti-Money Laundering Update

 Go to Legal & Regulatory section


2 Tax

2.1 FATCA Reporting Deadline

2.2 BEPS Update

 Go to Tax   section


3 Listing

3.1 New  ISE NAV Submission Process

Go to Listing section



1 Legal & Regulatory

1.1 AIFMD Update

On 16 July 2013, the European Union (Alternative Investment Fund Managers) Regulations 2013 (No. 257 of 2013) gave effect to Alternative Investment Fund Managers Directive (2011/61/EU) ("AIFMD") in Ireland.

There have been a number of developments over the quarter:

(a) ESMA Q&A 

On 12 May 2015, the European Securities and Markets Authority ("ESMA") published an updated version of its Q&A on the application of AIFMD. It includes nine new questions and answers on reporting to national competent authorities ("NCAs"), under Articles 3, 24 and 42 of AIFMD and one new question on calculation of leverage.

(b) Central Bank Q&A

On 12 June 2015, the Central Bank of Ireland ("Central Bank") published a thirteenth edition of its AIFMD Q&A. It amends:

  1. question 1030 on the transitioning of professional investor funds and QIAIFs which can continue to be managed by non-EU AIFMs under the existing transitional arrangements until at least 22 October 2015 when this position will be revisited; and 
  2. question 1058 on when the NU Series of Notices cease to apply to a professional investor fund and what new rules will apply.

New questions 1089 - 1093 which clarify the marketing of unauthorised AIFs are also included.  

(c) Revised AIF Rulebook

On 12 June 2015, the Central Bank published the latest version of the AIF Rulebook which was amended to include a definition of Irish resident as a "person who is present in Ireland for the whole of 110 business days per year".

(d) AIFMD forms

On 15 June 2015, the Central Bank updated a number of the AIFMD forms: application form for authorisation as an AIFM; application form for authorisation as an AIF Management Company; application form for registration as an AIFM; Qualifying Investor AIF application forms; Retail Investor AIF application forms; and Post-Authorisation forms.

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1.2 Irish Collective Asset-Management Vehicle Act 2015 

The Irish Collective Asset-management Vehicle Act 2015 was commenced on 12 March 2015. The Central Bank is the registrar for Irish Collective Asset-management Vehicles ("ICAVs"). In June 2015 two regulations were made in relation to the CRO form to be used by an investment company wishing to deregister as a company following ICAV registration and the fee (15 euro) payable.

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1.3 UCITS: Update

On 13 April 2015, ESMA made available the responses it has received to its discussion paper on share classes of UCITS (ESMA/2014/1577). 

On 12 June 2015, the Central Bank published a fifth edition of its UCITS Q&A. A new question 1013 on redomiciliations is included that provides that an investment fund re-domiciling to Ireland as a UCITS may disclose its past performance in its KIID relating to the period when it was domiciled outside Ireland where the UCITS management company confirms that:

  • the UCITS investment policy, strategy and portfolio composition have not been substantially altered as a consequence of the transfer to the UCITS regime;
  • there is no change to the entities involved in the investment management of the UCITS;
  • it is satisfied that the past performance data is accurate; and
  • appropriate disclosure will be included with the past performance in the KIID stating that the data relates to a period when the investment fund was domiciled outside Ireland and was not authorised as a UCITS.

The UCITS V Directive 2014/91/EU must be transposed by each EU Member State into national law by 18 March 2016. ESMA is currently working on technical advice on delegated acts required by UCITS V.

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1.4 Companies Act 2014

The Companies Act 2014 (the "Act") was commenced substantially with effect from 1 June 2015. As a matter of good corporate governance, the constitution of all companies should be reviewed and updated in accordance with the Act. On 12 June 2015 the Central Bank clarified that it does not require UCITS management companies, alternative investment fund managers, AIF management companies, fund administrators, depositaries and investment firms which are companies to convert to a Designated Activity Company ("DAC") on the basis that corporate structuring is a matter for each entity. However as regulated firms, we consider it would be prudent to convert to a DAC in any case.

For more information see our client update, Companies Act 2014 for Funds: Should Mancos convert to DACs?

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1.5 Fund Management Company Boards

On 12 June 2015 the Central Bank published a document in relation to Fund Management Company Boards which includes:

a feedback statement on the Central Bank's consultation on fund management company effectiveness that issued, in the form of Consultation Paper 86 (CP86), in September 2014;

  • Consultation on delegate oversight guidance;
  • Publication of guidance on:
  1. Organisational effectiveness; and
  2. Directors time commitments. 

For more information see our client update, Central Bank Issues New Rules for Fund Boards which is available on request.

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1.6 Money Market Funds: Update

On 29 April 2015, the European Parliament announced that, at its plenary session of the same date, it voted to adopt a report by ECON containing amendments to the European Commission's proposed Regulation on Money Market Funds. The Parliament's vote consolidates its position for future trilogues with the Council of the EU and the Commission.

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1.7 EMIR Update

The European Market Infrastructure Regulation (Regulation on OTC derivative transactions, central counterparties ("CCPs") and trade repositories (Regulation 648/2012)) ("EMIR") is relevant to all Irish funds trading in financial derivative instruments ("FDI") whether on an exchange or otherwise.

On 27 April 2015, ESMA published the thirteenth update of its Q&A (ESMA/2015/775) on the implementation of EMIR with further detail on the content of derivatives reports to be submitted by funds to trade repositories.

The first OTC clearing obligation will apply in respect of certain OTC interest rate swaps (settled in EUR, GBP, JPY and USD), and we would anticipate that the first effective date will fall in Q2 2016 (with other OTC derivatives classes to follow – consultations have also been taking place on clearing certain index credit default swaps and certain non-deliverable FX forwards). On 11 May 2015 ESMA published a fourth consultation paper (ESMA/2015/807) on the clearing obligation under EMIR seeking views on the regulatory technical standards ("RTS") that ESMA is required to draft (for consideration as legislation by the Commission). It proposes extending the clearing obligation on additional classes to OTC interest rate derivatives that were not included in the first RTS on the clearing obligation for interest rate swaps.

ESMA published an opinion in May 2015 on the impact of EMIR on UCIT S which calls for a modification of the UCITS Directive to take into account the incoming clearing obligations for certain types of OTC financial derivative transactions when calculating counterparty exposure limits. It states that the UCITS Directive should no longer distinguish between OTC financial derivative transactions and exchange-trade derivatives. Instead, the distinction should be between cleared and non-cleared financial derivative transactions, with potentially some analysis of the details of the clearing arrangements to assess counterparty risk. For OTC financial derivative transactions that are not centrally cleared, it opines that the current counterparty risk limits in Article 52 of the UCITS Directive should continue to apply.

On 10 June 2015, the Joint Committee of the European Supervisory Authorities ("ESAs") published a second consultation paper (JC/CP/2015/002) on draft RTS on risk mitigation techniques for OTC derivative contracts not cleared by a CCP under Article 11(15) of EMIR. Rules are pending on eligible collateral for uncleared OTC transactions.

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1.8 Corporate Governance Requirements for Investment Firms 

The Central Bank of Ireland published a consultation paper (CP94) on Corporate Governance Requirements for Investment Firms on 5 May 2015. It sets out proposed requirements that firms will be required to comply with including:

  • Minimum board size;
  • The composition of the board;
  • The role of the Chairman;
  • The role of the CEO;
  • The frequency of board meetings;
  • The role and composition of the risk committee; and
  • The role and composition of the audit committee.

Responses are invited by 5 August 2015.  

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1.9 MiFID II/MiFIR

The Markets in Financial Instruments Directive (2014/65/EU) ("MiFID II") and the Markets in Financial Instruments Regulation (Regulation 600/2014) ("MiFIR") will repeal and recast the Markets in Financial Instruments Directive (2004/39/EC) ("MiFID") They must be transposed into national law by 3 July 2016 and will apply from 3 January 2017 (subject to a small number of excepted sections).

ESMA is required to develop guidelines specifying criteria for the assessment of knowledge and competence of natural persons in investment firms providing investment advice or information about financial instruments, investment services or ancillary services to clients, on behalf of the investment firms, to fulfil those firms' obligations under Article 24 and Article 25 of MiFID II. On 23 April 2015 ESMA published a consultation paper (ESMA/2015/753) on its draft guidelines. It considers that compliance with the knowledge and competence requirements under MiFID II requires individuals to have an "appropriate qualification" and gain "appropriate experience" to provide investment advice or information to clients. The draft guidelines set out the areas of knowledge and experience against which individuals should be assessed.

On 6 May 2015, ESMA published guidelines (ESMA/2015/675) on the definitions of commodity derivatives and their classification under C6 and C7 listed in Section C of Annex 1 to MiFID. The guidelines, which apply to NCAs, provide a common, uniform and consistent application of these definitions until MiFID II comes into force. Currently there is no single commonly adopted definition of derivatives in the EU under MiFID, particularly in the case of physically settled commodity forwards. The guidelines will apply from 7 August 2015 and will be superseded by the Commission's MiFID II delegated acts. 

On 30 June 2015, ESMA published its final report on MiFID II/MiFIR draft implementing technical standards ("ITS") and RTSs on authorisation, passporting, registration of third country firms and cooperation between competent authorities. This covers the majority of the draft RTS and ITS on investor protection topics which ESMA is to develop. The remaining standards ESMA is mandated to develop will be published by the end of 2015. The European Commission has three months to endorse the draft standards.

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1.10 PRIIPs KID Regulation 

The Regulation on key information documents ("KIDs") for packaged retail and insurance-based investment products ("PRIIPs") ("PRIPs KID Regulation") introduces a new pan-European pre-contractual product disclosure document for PRIIPS in EU Member States from 31 December 2016.

The Joint Committee of the ESAs on 23 June 2015 published a technical discussion paper on risk, performance scenarios and cost disclosures for KIDs for PRIIPs and has requested feedback by 17 August 2015.

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1.11 European Venture Capital Funds and Social Entrepreneurship Funds 

The European Venture Capital Funds Regulation (Regulation 345/2013) sets out a marketing passport to allow fund managers to market qualifying venture capital funds to EU investors using the EuVECA designation. The European Social Entrepreneurship Funds Regulation (Regulation 346/2013) sets out a marketing passport to allow fund managers to market qualifying social entrepreneurship funds to EU investors using the EuSEF designation.

The European Union (European Venture Capital Funds) Regulations 2015 and the European Union (European Social Entrepreneurship Funds) Regulations 2015 published on 20 May 2105 appoint the Central Bank as the competent authority for these funds in Ireland.

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1.12 CSDR

On 30 June 2015, ESMA published a consultation paper (ESMA/2015/1065) on the operation of the buy-in process under the Regulation on improving securities settlement and regulating central securities depositories ("CSDs") (Regulation 909/2014) ("CSDR").

Under the CSDR, a buy-in process is initiated if a failing participant does not deliver financial instruments within a specified timeframe after the intended settlement date. Under CSDR ESMA must develop draft RTS specifying the process for the operation of the buy-in, including the timeframe to deliver the financial instruments. The consultation focuses on which entity will be responsible for operating the buy-in process for OTC transactions that are not centrally cleared. ESMA seeks views on three separate options that may form the basis of its final draft RTS.

On 18 June 2015, ESMA published a letter sent to the European Commission relating to the timeframe for delivery of draft technical standards under CSDR due on 18 June 2015 envisaging a delay to September 2015 which was subsequently acknowledged by the Commission.

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1.13 Market Abuse and Criminal Sanctions 

The Market Abuse Regulation (Regulation 596/2014) ("MAR") will apply from 3 July 2016 and the Directive on criminal sanctions for insider dealing and market manipulation (2014/57/EU) ("CSMAD") has to be transposed into Irish law on the same date (together, MAD II). 

The European Parliament's Committee on Economic and Monetary Affairs ("ECON") on 3 June 2015 published letters sent to the European Commission and ESMA on managers' transactions and, in particular, the proposal in ESMA's technical advice on MAR to treat transactions in baskets, index-related instruments and investment funds differently to transactions in other financial instruments for reporting purposes. This means that those discharging managerial responsibilities would not have to report transactions in baskets, index-related instruments and investment funds where shares in their own company constitute less than 20% of such financial instruments.

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1.14 Benchmark Regulation on Indices

The proposed Regulation on indices used as benchmarks in financial instruments and financial contracts ("Benchmark Regulation"). On 21 May 2015, the European Parliament published a document containing the amendments to the Benchmark Regulation that it approved at its plenary session on 19 May 2015. The Parliament announced on 19 May 2015 that it had agreed a negotiating mandate on the Benchmark Regulation for the purposes of entering into trialogues with the Council of the EU and the European Commission. Agreement is expected to be reached on the final version by the end of 2015.

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1.15 ELTIF Regulation Finalised

The Regulation on European Long-Term Investment Funds ("ELTIF Regulation") is designed to provide a framework for retail investment in illiquid asset classes such as infrastructure projects and unlisted companies. ELTIFs will have to apply for authorisation, have a regulated structure and comply with specified rules so that they offer long term and stable returns. The ELTIF Regulation came into force on 8 June 2015 and applies from 9 December 2015.

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1.16 Review of Draft RTS under CSDR, UCITS V, MAR, MiFID II, MiFIR and Transparency Directive

On 13 May 2015, ESMA published its letter to the European Commission's Directorate General for Financial Stability, Financial Services and Capital Markets Union welcoming the agreement reached on conducting an early legal review of draft technical standards to ensure legally sound final standards. The early review process will apply to draft technical standards under the CSDR (the Regulation on improving securities settlement and regulating central securities depositories ("CSDs") (Regulation 909/2014)), the UCITS V Directive (2014/91/EU), the Transparency Directive (2004/109/EC), the Market Abuse Regulation (Regulation 596/2014) ("MAR"), the MiFID II Directive (2014/65/EU) and the Markets in Financial Instruments Regulation (Regulation 600/2014) ("MiFIR").

This review process by Commission services will constitute an additional step and, could result in a lengthening of the time before ESMA can adopt the draft technical standards. 

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1.17 IFIA Guidance Paper on Connected Party Transactions and Depositary Obligations

The IFIA published a Guidance Paper on Connected Party Transactions on 16 April 2015 with a view to assisting depositaries in discharging their regulatory obligations as outlined in the Central Bank’s UCITS Notice 14.5, NU 2.10, and Chapter 1 part 1 section 1 xii and Chapter 2 part 1 section 1 viii of the AIF Rulebook.

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1.18 AIMA: Due Diligence Questionnaire and Fund Directors Guide

The Alternative Investment Management Association published an updated edition of its due diligence questionnaire for pension funds and other investors to use when selecting a fund of hedge funds manager in June 2015. This follows on from its revised version of its illustrative questionnaire for due diligence of prime brokers published in May and its updated Funds Directors Guide which was published in April 2015 and takes account of regulatory and tax reforms since the financial crisis such as AIFMD and FATCA.

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1.19 EU Capital Markets Union

On 18 February 2015, the European Commission published a green paper on building a capital markets union ("CMU"). On 1 April 2015, the Minister for Finance invited interested parties to make submissions on the green paper. Responses received by the Commission were published on 10 June 2015. The IFIA responded to the consultation and welcomed the initiative as a significant opportunity and highlighted the need to position Ireland as an enabler and facilitator of CMU. The Commission intends to publish its CMU action plan in September 2015.

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1.20 Client Assets and Investor Money Regulations

On 20 May 2015, the Central Bank hosted an industry seminar on the recently published Investor Money Regulations, which become effective on 1 April 2016.  It provided an overview the six principles and its expectations on the implementation of each of the principles. The IFIA Investor Money Working Group also produced an industry information note with an overview of the regime, highlighting the main points and impact on fund service providers. On 4 June 2015, the Central Bank hosted a similar industry seminar on the Client Assets Regulations which come into force on 1 October 2015.

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1.21 Securities Financing Transactions Regulation

The proposed Regulation on securities financing transactions ("SFTs") seeks to cover all forms of lending, borrowing and re-use of securities in the EU and in all the branches of counterparties to SFTs no matter where they are located.

On 29 June 2015, the Council of the EU announced that its Permanent Representatives Committee ("COREPER") has approved and published the final compromise text of the proposed Regulation. An agreement on the text was reached with the European Parliament on 17 June 2015. The European Parliament is due to consider it in its plenary session on 5 - 8 October 2015.

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1.22 Investment Funds Statistics: Q1 2015

The main points to note in the Central Bank's update are:

  • The net asset value of investment Funds resident in Ireland ("IFs") expanded by over 36% in the year to Q1 2015,  rising to €1,452 billion from €1,066 billion in Q1 2014;  
  • IFs benefitted from an unusual combination of buoyant equity and debt security markets with positive revaluations accounting for three-quarters of the net asset value increase; 
  • Real estate funds were the strongest performing fund type in terms of revaluations, while equity funds marginally outperformed mixed and hedge funds; 
  • Within bond funds, there was a clear shift towards longer-term maturities reflecting the current low interest rate environment. 
  • The impact of quantitative easing on holdings of euro area debt was limited.  There was strong preference for UK debt throughout the period, however. 

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1.23 Anti-Money Laundering Update

On 25 June 2015, the Fourth Money Laundering Directive ((EU) 2015/849) ("MLD4") and the revised Wire Transfer Regulation ((EU) 2015/847) ("WTR") came into force. MLD4 will repeal and replace the Third Money Laundering Directive (2005/60/EC) and its implementing Directive (2006/70/EC).

Member States must adopt and bring into force the measures transposing MLD4 into national law by 26 June 2017. The WTR applies from 26 June 2017. The first Wire Transfer Regulation is also repealed.

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2. Tax

2.1 FATCA Reporting Deadline 

The US Foreign Account Tax Compliance Act ("FATCA") enables the US Internal Revenue Service ("IRS") to obtain information about the income of US persons from financial institutions outside the US. FATCA affects Irish investment funds and adds to their existing compliance obligations.

The next step for all Irish entities which are classified as Financial Institutions ("FIs") for FATCA purposes is to submit a return (the "FATCA Return") to Irish Revenue by 31 July 2015 setting out details of any US reportable accounts they may have maintained during the 2014 calendar year or to confirm by way of nil return that they maintained no such accounts.   All Irish FIs should ensure that they have appointed an appropriate person to review their account holder information and that they are in a position to file the relevant return by 31 July 2015.

Please speak to your regular Maples and Calder Funds or Tax contact for more details or see our client update, FATCA and CRS Ireland Update – Are you Ready to Report?

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2.2 BEPS Update

The OECD launched the BEPS project in July 2013. It comprises an action plan that lays out 15 key elements of international tax rules that must be addressed by the end of 2015. These actions have or will produce "deliverables" which will be presented to the G20 Finance Ministers in October 2015, in conjunction with a timetable for their implementation.  Of particular interest to international investment funds is Action 6 entitled "Prevent treaty abuse".  Relief from double taxation on income is an important part of efficient fund management.  

The OECD report on Action 6 proposed two main rules to be adopted by countries in their double tax treaties: a limitation on benefits ("LOB") clause and a principal purpose test ("PPT").  At minimum countries will be expected to adopt either (a) a combination of the LOB rule and the PPT rule; (b) the PPT rule; or (c) the LOB rule supplemented by a mechanism that would deal with conduit financing arrangements.  Several discussion drafts have been produced and commented on over the last year.  

There has been some engagement in respect of CIVs (which are taken to be collective investment vehicles that are widely held) and to a lesser extent non-CIV funds. The latest discussion draft dated 22 May 2015 indicates support for the conclusions of the 2010 OECD Report on the Granting of Treaty Benefits with Respect to Collective Investment Vehicles and for the adoption of the TRACE implementation package.  

Public comments received on the latest discussion draft were published on 17 June 2015.  The tax group of Maples and Calder assisted the Managed Funds Association ("MFA") in preparing their submission and has also assisted the Irish Funds Association and the Irish Debt Securities Association with their various submissions on BEPS. 

The OECD have stated that the work on non-CIV funds will extend beyond the October 2015 adoption of the final report on Action 6 but should, in any event, be completed before the December 2016 deadline for the negotiation of the multilateral instrument that will implement the work on Action 6.

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3. Listings

3.1 New  ISE NAV Submission Process

All fund issuers that have classes admitted to the Main Securities Market of the Irish Stock Exchange ("ISE") must submit Net Asset Value ("NAV") per class in accordance with the Code of Listing Requirements and Procedures for Investment Funds. 

A new process for submitting NAVs will be implemented in September 2015. The new enhanced service will be operated securely, and on a timely basis, enabling efficient filing, real time intraday detail updates, straight through processing and publication to market. This ensures fund issuers can continue to comply with their regulatory and transparency obligations under relevant EU securities legislation and ISE Listing Rules. Those entities responsible for the timely submissions of NAVs to the ISE will be required to register on the ISE’s online platform www.isedirect.ie. Entities that are already registered for other ISE Direct products will not have to register again, however they will be required to accept the Terms and Conditions for NAV submission.

Effective September 2015, NAVs must be submitted electronically through the ISE’s online platform www.isedirect.ie or emailed via the ISE’s autonav service which will have a new dedicated email address. NAVs received via existing ISE email addresses (nav@ise.ie or autonav@ise.ie) after this date will not be filed and/or published. Fax and other hard copy forms will no longer be acceptable from this date also.

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3.2 New Online Process For All Unlisted ISIN Applications

From 29 June 2015 all requests for unlisted ISIN applications must be via the ISE’s secure online portal www.isedirect.ie. Details required to be submitted to the ISE remain the same and Maples and Calder, as a registered user can process ISIN codes within 48 hours of application with the ISE. The ISE have also compiled FAQs on the new process.

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3.3 ISE Fund Hub

Since its launch in November 2014, in excess of 30 fund managers are now featured on the ISE Fund Hub. The Fund Hub is a portal available for ISE listed funds which allows investment managers display net asset values for its listed shares along with various performance and analytics features. The Fund Hub can also host documentation and display a funds profile.

For further details, please contact Laurence Morrissey (laurence.morrissey@maplesandcalder.com).

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© Maples and Calder 2015

This update is intended to provide only general information for the clients and professional contacts of Maples and Calder. It does not purport to be comprehensive or to render legal advice.

Contacts

Dublin

Maples and Calder 都柏林办事处
Barry McGrath
work +353 1 619 2029
Maples and Calder 都柏林办事处
Peter Stapleton
work +353 1 619 2024
Maples and Calder 都柏林办事处
Stephen Carty
work +353 1 619 2023
Maples and Calder 都柏林办事处
Carol Widger
work +353 1 619 2762
Maples and Calder 都柏林办事处
Emma Conaty
work +353 1 619 2708
Maples and Calder 都柏林办事处
Adam Donoghue
work +353 1 619 2718
Maples and Calder 都柏林办事处
Andrew Quinn
work +353 1 619 2038