Five Questions on CP86

Niamh Ryan, Partner at A&L Goodbody, discusses the Central Bank of Ireland’s new governance regime for funds domiciled in Ireland.

For those who haven’t been following developments closely, what is CP86?

CP86 is a set of rules and guidance issued by the Central Bank of Ireland related to the governance and effectiveness of Irish authorised ManCos (fund management companies), including self-managed funds. The first set of guidance was published in November 2015 and the finalised guidance was issued in December 2016.

The Central Bank’s guidance is focused on three main areas:

  • Governance: how directors perform their roles and guide the ManCos
  • Compliance: how DPs (Designated Persons) carry out their managerial functions
  • Supervisability: how ManCos engage with the Central Bank and the its access to records, directors, and DPs

CP86 is primarily guidance, and the Central Bank does state that divergence from the guidance will not be a regulatory breach, but that supervisors should refer to the guidance when determining if a ManCo has complied with its regulatory obligations.

What are the biggest changes to the final CP86 rules?

The biggest changes to the final CP86 rules are to the location rule for directors and DPs and the new requirements for retrievability of records.

The finalised location rule was by far the most controversial of the new requirements. The original proposal required two thirds of directors and DPs must be located in the EEA (European Economic Area). In the final version, this was reduced to one half. The requirement that when DPs were not working from the same location, they would have to be employed by the same group of companies was also dropped in the final guidance.

CP86 requires that ManCos must be able to provide the Central Bank with records when requested within prescribed timelines and companies are required to have a record retention policy, which must be audited annually.

The location rule has received the most attention. What are the key aspects of this rule?

The general rule is that a ManCo “shall conduct a preponderance of its management in the EEA.” Where a ManCo has a PRISM (Probability Risk and Impact SysteM) impact rating of Medium Low or above, it must have:

  • At least three directors resident in the State, or at least two directors and one DP resident in the State
  • Half of its directors resident in the EEA
  • Half of its managerial functions performed by at least two DPs resident in the EEA

Where a ManCo has a PRISM impact rating of Low, it must have:

  • At least two directors resident in the State
  • Half of its directors resident in the EEA
  • Half of its managerial functions performed by at least two DPs resident in the EEA

It is worth noting that self-managed funds have a low PRISM impact rating, so the second rule is applicable to those entities.

Beyond the location rule, what are the other key elements of the new rules?

There are six chapters in the guidance but I’ll summarise the key elements under the three focus areas, which are governance, compliance, and supervisability and organisational issues.


  • An independent director must undertake an organisational effectiveness role, which is a specific task of keeping the effectiveness of the organisation under review, including reporting to board members.
  • Streamlines management for ManCos to six functions: investment management, fund risk management, oversight risk management, regulatory compliance, distribution and capital, and financial management.
  • Directors and boards need to agree on a minimum time allocation for board meeting attendance, which should be documented in a letter of appointment.
  • Directors with 20 directorships and an aggregate professional time commitment in excess of 2000 hours are considered high risk; ManCos with such individuals on their boards will be prioritised when it comes to themed inspections.


This part of the guidance in CP86 focuses on the DP:

  • Provides guidance on who the DP should be and how they should carry out their role, including that they be sufficiently senior in their role vis-a-vis delegates and engagement with the Central Bank
  • Clarifies that DPs can be directors or employees of the ManCo or can be seconded on a full or part-time basis from another firm, such as the investment manager or from a firm which specialises in the provision of DPs
  • Specifies that the DPs do not have to be located in Ireland but the location rule mentioned above needs to be adhered to
  • Requires DPs to have a letter of appointment filed with Central Bank as part of the ManCo’s authorisation process, (setting out details such as fees and time commitment) including where a director is acting as a DP

Supervisability and Organisational Issues 

This part of CP86 covers the location rule. It also includes some new requirements and rules on the Central Bank’s expectations for retention, maintenance, security, and accessibility of documentation and records of the ManCo. The main ones to be aware of are that ManCos are required to:

  • Provide the Central Bank with records where requested within prescribed timelines – namely, same day if request is received before 1pm on that day, or by midday the following day if the request is received after 1pm
  • Have a record retention policy which must be audited annually either externally or internally (by the internal audit function); the Central Bank expects that the policy is independently reviewed
  • Maintain a designated and monitored email address for correspondence with and responding to information requests from the Central Bank; the effectiveness and efficacy of the email address may be tested periodically by the Central Bank

When will CP86 go live?

Part of CP86 is already live. The delegate oversight guidance and the director time commitments guidance has been applicable since it issued in November 2015.

Any ManCos authorised before 1 November 2015 have until 1 July 2018 to comply with the new rules i.e. organisational effectiveness, six managerial functions, the location rule, and retrievability of records rule.

For new ManCos, the new rules are in effect for all new applications from 1 July 2017. ManCos authorised between 1 November 2015 and 30 June 2017 will already be in compliance with the organisational effectiveness and revised managerial functions requirements. They will have until 1 July 2018 to comply with the two other rules.

Finally, what’s the best book you’ve read recently?

The Vegetarian by Han Kang.

About Niamh Ryan

Niamh Ryan is a Partner in the Asset Management & Investment Funds Group and Head of A&L Goodbody’s London office. Niamh specialises in the establishment, operation, and regulation of all types of UCITS, and alternative investment funds (AIFs). She also advises fund service providers, including administrators, custodians, and prime brokers as well as promoters and investment managers. Niamh regularly contributes to articles on Irish fund matters to fund and other publications.

The views expressed in this material are those of the author as of February 14, 2017 and may or may not be consistent with the views of Brown Brothers Harriman & Co. and its subsidiaries and affiliates (“BBH”), and are intended for informational purposes only.

Neither, Brown Brothers Harriman, its affiliates, nor its financial professionals, render tax or legal advice. Please consult with attorney, accountant, and/or tax advisor for advice concerning you particular circumstances.

BBH is not affiliated with Ms. Ryan or A&L Goodbody.