The rules in the rulebook apply to all qualifying AIFs. However, the definitive rules are set out in their letter of authorisation.
A Qualifying Investor AIF shall have a minimum subscription of €100,000 or equivalent in other currencies. It shall not accept subscriptions from persons that group amounts of less than €100,000 for individual investors.
It shall only accept subscriptions from an investor who is a professional client within the meaning of Markets and Financial Instruments Directive;
or receives an appraisal from an EU credit institution, or MiFID firm or UCITS management company that the investor has the appropriate expertise, experience and knowledge to adequately understand the investment in the Qualifying Investor AIF;
or certifies that they are an informed investor by furnishing: confirmation in writing that the investor has such knowledge of and experience in financial and business matters as would enable him to properly evaluate the merits and risks of the prospective investment or certifies that they are an informed investor by providing confirmation that the investor’s business involves, whether for its own account or on account of others, the management, acquisition or disposal of property of the same kind as the property of the Qualifying AIF.
The fund may grant exemptions from minimum subscription requirements to the following:
- management company or general partner;
- investment advisor or the investment manager to the QAIF, director of the management company, investment company;
- employee of the management company, investment company or employee of a company appointed to provide investment management or advisory services;
- employee of the management company, investment company or general partner where the employee is directly involved in investment activities of the fund or a senior employee of company and has the experience in the provision of investment management services.
The Qualifying Investor AIF must ensure that prospective unitholders certify in writing that they meet the minimum criteria listed above or that they are aware of the risk involved in the investment and of the fact that such investments carry the potential to lose all monies invested.
A Qualifying Investor AIF shall not raise capital from the public through the issue of debt security. This does not apply to prevent issue of notes by funds on a private basis to a lending institution to facilitate financing arrangements.
The fund shall not grant loans or act as a guarantor in relation to third party. This does not prejudice its ability to acquire debt security nor to prevent it acquiring securities which are not fully paid.
The fund shall not have a management company or general partner or manager which acquires shares which enable it to exercise a significant issue over the management of an issuing body. This does not apply to investments in other investment funds. It does not apply where the fund is a venture capital, development capital or private equity Qualifying AIF provided the prospectus indicates its intention regarding the existence of legal and management control over the underlying investment.
The fund must ensure calculation of performance fees are verified by a depositary or competent person appointed by the Manager and approved by the depositary.
The Fund shall specify, in its constitutional documents, the maximum annual fee charged by the manager or management company. It may not be increased without approval on the basis of a majority of persons at a members’ meeting. In the event of an increase in the fee, unitholders must be entitled to redeem their units prior to implementation of the increase.
The fund shall specify, in its constitutional documents or prospectus, the maximum charge relating to redemption and repurchase of units. This similarly may not be increased without the approval of a majority of members in a General Meeting.
The limits on investments contained in the handbook and set out in the prospectus shall apply at the time of purchase of investments and continue to apply thereafter. If they are exceeded for reasons beyond the control of the fund or as a result of exercise of subscription rights, the matter is to be recorded and the fund must adopt as a priority object, the remedying of that situation, taking account of the interests of the unitholder.
The fund must comply with its constitutional document. It must entrust its assets to a depositary for safe keeping and this must be provided in the constitutional documents.
It must prescribe the remuneration and expenditure which the manager etc. is empowered to charge to the fund and the method of calculation of such remuneration. The fund must not replace the depository without the consent of the Bank. The procedure for replacement must be specified in the constitutional documents. There are special provisions in relation to subscription, redemption and distribution of assets in specie rather than in cash.
The fund shall specify in its constitutional documents the rules for valuation of assets. Assets shall only be purchased and sold at prices which are in conformity with the rules in the constitutional documents. The fund shall in its constitutional documents establish conditions for the creation and cancellation of units or for contributions and withdrawal of contribution.
The fund shall only issue or sell its units at a price arrived at by dividing the net asset value of the fund by the number of units outstanding; such price may be increased by duties and charges. The fund shall only redeem or purchase its units at a price arrived at by dividing the net asset value of the fund by the number of units outstanding. Such price may be decreased by duties and charges.
Where a fund is an open-ended fund, it shall provide redemption facilities at least once a quarter. It will redeem when requested at least 10% of its net assets on a monthly basis or 25% on a quarterly basis. It shall not impose a redemption fee of more than 5% of net asset value per unit.
Funds which offer redemption and settlement on less than a quarterly basis or provide a period of more than 90 days between dealing deadlines and payment of redemption are not subject to any regulatory parameters in terms of dealing frequency, minimum redemption quotas or timeframe for settlements, provided they classify themselves as open-ended Qualifying Investor AIFs with limited liquidity.
There are provisions applicable to the creation of share classes within a fund or an umbrella. The constitutional documents must provide for the creation of the share classes. Each qualifying fund or sub-fund must consist of a single common pool of assets. Assets may not be allocated to individual share classes. The capital gains or losses or income arising from the pool must be distributed or accrue equally to each shareholder relative to their participation in the fund.
Unitholders in a share class must be treated equally. Where there is more than one share class, the unitholders of different classes must be treated fairly.
Share classes may be established which may be differentiated on the basis of subscription procedures, distribution policies, charging structure, hedging policies and other criteria.
A fund may allocate assets including derivatives to individual share classes where the arrangement is not made for the purpose of pursuing a separate investment objective by the share class; does not result in a share class operating de facto as a separate fund; or is not created to circumvent requirements above.
The fund is to distribute or accrue capital gains or losses or income or losses from the each class for each unitholder relative to their participation in the share class. There must be a prominent disclosure in the prospectus of the ability to establish such share classes and attendant risks. There must be clear authority. There must be an unambiguous valuation and allocation provision.
To the extent possible under the investment fund legislation and law, the constitutional document are to contain provisions aimed at achieving segregation of liability between the share classes and share classes participating in the common fund. Where this is not possible, this must be prominently disclosed in the prospectus. The arrangements must be fully prescribed and disclosed in the constitutional documents and prospectus.
An umbrella fund must obtain Central Bank approval for each sub-fund. It must ensure that each fund complies with requirements to which it is subject.
The constitutional document must provide that assets of each sub-fund belonged exclusively to the fund and shall not be used to discharge liabilities of other funds. There are provisions in relation to management fees charged, where there are investments in sub-fund of the umbrella. There must be no double charging of certain categories of fees, including annual management fee.
There are provisions for establishment of a subsidiary. Prior Central Bank approval is required. It must be wholly owned and the fund directors must form a majority of the board. The subsidiary must not be a fund or an issuing body.
The fund may only enter transactions with a management company, depositary, delegates or their group companies, where they are negotiated at arm’s length. They must be in the best interests of the unit holder. Transactions permitted must be at a valuation by a person approved by the depositary, executed on best terms on ab organised exchange or where the above is not practical, on terms which the depositary and the fund in the case of transactions involving the depositary, is satisfied conform with the above principles.
A fund must have an authorised fund manager. It shall not alter its name or constitutional documents without the prior Central Bank approval. It shall give prior notification of amendments including prospectus, constitutional documents or material agreements entered with third party. The Central Bank may object and the amendments objected to shall not be made. The fund is to notify the Central Bank of any material breach of investment fund legislation or requirements imposed by the Central Bank.
Departures from the office of directors, partners etc. and reason for departure must be notified to the Central Bank.
In the case of a qualifying AIF which is an investment fund, where the director wishes to resign and the fund must form a view as to the impact of the resignation on the Management Company having regard to its current and prospective financial state of the funds under its arrangement. In the event that the Board or the Chairman forms the view that the situation is one which could create concern on the part of the Central Bank, it is to state this to the Central Bank.
Where a Qualifying Investor AIF is an investment company, it shall ensure that it does not have investors in common with the Board of Directors or its depositary. It must have a minimum of two directors who are Irish resident. It shall ensure that each of its directors is required to disclose to the Board any concurrent directorships they hold.
Where the fund temporarily suspends calculation of the net asset value or repurchase or redemption of units, it must inform the Central Bank and on any event within the working day on which the suspension took place.
There must be approved procedures for the replacement of the depositary, manager, management company, general party and certain other key third parties. In the case of the depositary, the fund must ensure that the Central Bank receives confirmation from both the retiring and new depositary that they are satisfied with the transfer of assets.
A Qualifying Investor AIF may only terminate appointment of a depositary on the appointment of a successor depositary or upon revocation of authorisation as such.
The fund must submit monthly returns to the Statistics Division of the Central Bank using online reporting system. There were specified information which must be included in the return including, fund type, gross or net asset value; number of units; net asset value per unit; payments received and made for issues and redemptions and repurchases; profit and loss; investment management fees accrued and other expenses accrued in the period.
The fund must undertake a quarterly Survey of Collective Investment Undertakings returns to the Statistics Division of the Central Bank within ten days of the end of each quarter.
The requirements in respect of prospectuses are broadly similar to those in respect of Retail AIF. See the separate chapter in this regard.
The fund must publish a prospectus which must be dated and the essential elements must be kept up to date. It must contain sufficient information for investors to make an informed judgment of the investment proposed. The prospectus must be available free of charge to every prospective unitholder before a contract is entered into.
The fund shall comply with the terms of the prospectus. It shall not change its investment objectives or effect a material change in its investment policies, as disclosed in the prospectus without the consent or approval of all unitholders or a majority of votes cast at General Meeting.
The minimum information to be disclosed in the prospectus sent out in the regulations. This includes the following:
- legal format;
- date of establishment;
- place where the constitutional document and reports etc. may be obtained;
- brief indications of the relevant to tax system;
- accounting dates and frequencies;
- persons responsible for information;
- rules for determining and applying information; names of key directors and officers;
- material provision of contracts with third parties;
- authorised share capital;
- base currency;
- the main characteristics and type of the units and in particular, the rights attached to them, whether the provision of securities or certificates provide evidence of title; whether there is a register, characteristics and indication of denominations; indication of voting unitholders’ rights; provisions regarding winding up.