CP86 compliance of Irish fund management companies (ManCos) and self-managed investment companies (SMICs) has evolved considerably since 2014. In 2020, the Central Bank of Ireland (CBI) conducted a review of Irish fund management companies (FMCs) in 2020, which found that many firms are falling short of implementing the necessary framework for governance, management, and oversight to meet CP86 compliance. The review provides clarity as to the regulator’s intentions.
In October 2020, the CBI reported that “a significant number of firms have not fully implemented the framework for fund company governance, management and oversight” as specified in the final CP86 Guidance issued in 2016. The CBI also said that firms not meeting the requirements may be subject to “supervisory engagement.” In response to the report and statement from the CBI, we spoke to several industry experts to get their insights and recommendations.
One problem the experts identified was that many managers had a “wait and see” attitude towards CP86, and now they find themselves behind. Specifically, resources and hiring are a challenge. CP86 requires FMCs to have at least three full-time employees (FTEs) to oversee a fund’s activities, which is meant to be scaled accordingly for larger firms. Many FMCs authorized before the framework have neglected to scale up their resources. On the other hand, some SMICs have no full-time employees and don’t have enough internal workflow to justify hiring the required three.
The timeline for correcting issues found during the CBI’s review is tight, with action plans for compliance needing to be reviewed and approved by boards by the end of March 2021. The plans would, of course, have to be created well in advance of that deadline. Then, the plans have to be implemented—another challenge.
One of the chief complaints in the CBI review was the “lack of evidence” of compliance. Meaning that, while firms may be taking the steps to be compliant, they can’t prove their compliance if they’re not tracking it. Manual tracking methods are time-consuming and error-prone. But technology can help.
SS&C’s GoCheck system can be implemented to manage and monitor tasks related to CP86 compliance, like recording incidents and timesheets, storing meeting minutes, and producing oversight reports. GoCheck is a web-based software solution that allows full transparency into task progress, with an audit trail reflecting which tasks have been completed and by whom, with a timestamp of completion.