Fast Track Authorisation Process

Irish Qualifying Investor Funds

SYL O'BYRNE, MAPLES AND CALDER

In February this year the Irish Financial Regulator introduced a fast track authorisation process for qualifying investor funds (“QIFs”). This authorisation process no longer requires a review by the Financial Regulator and a QIF can be authorised within 24 hours of a single filing of the final documents.

Where the Financial Regulator receives a completed application for the authorisation of a QIF before 3pm on any business day, a letter of authorisation for the QIF can be issued on the following business day. Applications for authorisation of QIFs under this filing process are accepted on the basis that the parties to the fund are already approved by the Financial Regulator i.e. the Promoter, Investment Manager and directors.

There is no change to the law and regulations governing QIFs and the Fund must meet the agreed parameters for a QIF. Applications have been accepted under the new procedure from mid February 2007.

The Irish Qualifying Investor Product

The QIF fund is the most flexible Irish authorised and regulated product available. There are no mandatory borrowing, leverage or investment restrictions, but simply a prohibition on the QIF acquiring a right to exercise significant influence over the management of an investee entity.

There is a minimum subscription requirement of €250,000 and shares or units can only be offered to “Qualifying Investors”. A Qualifying Investor is defined in the case of a natural person as being such person with a minimum net worth, excluding main residence and household goods, in excess of €1.25m or an institution which owns or invests, on a discretionary basis, at least €25m or the beneficial owners of which are qualifying investors in their own right.

The minimum subscription amount applies to the aggregate of an investor’s investments in the sub-funds of an umbrella fund, which can be taken into account for the purposes of determining this requirement. Following an initial subscription of €250,000, any subsequent subscriptions are unrestricted.

An exemption from the minimum subscription requirement and qualifying investor criteria is granted to the manager, the Investment Manager or directors or employees of the foregoing where such employees provide investment management or advisory services and are directly involved in the investment activities of the Fund. In the latter case the employer entity is required to be satisfied that the employee meets the criteria and the employee must complete certification to this effect. Where an entity or individual has not previously been approved as a Promoter, Investment Manager or Director, the Financial Regulator’s approval for such authorised person will continue to apply when seeking authorisation for their first Irish Fund.

Promoter Approval

All Irish authorised funds are required to have an approved Promoter which must be of good repute, have a significant level of financial resources and a demonstrable track record in the promotion of funds. A Promoter does not necessarily have any contractual role in relation to funds but typically they may also be the same entity which is appointed as Investment Manager to the fund.


“The Fast Track QIF has been welcomed by the industry and close to 20 such funds have been launched in the last few months. “


The application process for approval as a Promoter requires the filing of an application form together with supporting documentation, which includes individual questionnaires for all directors and senior managers of the Promoter together with the latest audited accounts and details of all beneficial owners of 10% or more of the applicant entity. If the applicant is already authorised and regulated in a jurisdiction recognised by the Financial Regulator as having equivalent regulatory protections, then a shortened time frame for approval applies.

Where this is the case, approval normally issues within two to four weeks. The time frame reflects the fact that the Financial Regulator will correspond directly with any home regulator to confirm the applicant’s regulatory status and also to correspond with referees.

Investment Manager Approval

All discretionary Investment Managers appointed to Irish funds must be authorised in a jurisdiction recognised by the Financial Regulator as having equivalent regulatory protections to Ireland, which typically includes OECD countries. Assuming that the applicant has already been authorised in an equivalent jurisdiction, the authorisation process takes approximately 2 to 3 weeks and can run parallel with that of Promoter approval.

The application process is broadly similar to that for Promoter approval in that it also requires the filing of an application form together with supporting documentation, which includes individual questionnaires for all directors and senior managers of the Investment Manager

Approval of Directors

All directors appointed to Irish funds must be approved by the Financial Regulator prior to their appointment to the Board of Directors. The process requires the completion of a detail Individual Questionnaire which outlines the qualifications and work experience of the applicant. The Financial Regulator’s approval process for directors focuses on the probity and competence of the applicant. As mentioned above, authorisation applications for Fast Tack QIFs require that all of the above parties be pre-approved by the Financial Regulator.

Conclusion

The Fast Track QIF authorisation process is a very positive development which acknowledges the critical importance of speed-to-market issues for certain investors and fund types and it has been implemented specifically to address market demands.

The most immediate effect is that the Fast Track process for the QIF eliminates the speed-to-market issues which were previously an issue. However, it in no way dilutes the regulatory standing of the QIF product nor the regulatory protections expected by investors investing in Irish regulated funds. Also for those Promoters with existing Irish long-only products, the Fast Track process for the QIFs will increase the attractiveness of Ireland as the domicile of choice for their alternative fund product range.

The Fast Track QIF product strikes a balance between maintaining an appropriate and robust but also flexible regulatory regime which continues to enable Promoters to bring innovative funds to the market. The Fast Track QIF has been warmly welcomed by the industry and close to 20 such funds have been launched in the last few months. It brings significant benefits to market participants and further enhances the attractiveness of Ireland as a fund domicile.

Syl O’Byrne, Maples and Calder, Dublin syl.obyrne@maplesandcalder.com