Central Bank fines ICAV for breach of EMIR reporting obligations

On 28 November 2023, the Central Bank of Ireland (the Central Bank) reported that it had reprimanded and fined an authorised UCITS ICAV the sum of €192,500 under Regulation 32 of the EMIR Regulations.

This represents the first monetary penalty which the Central Bank has imposed on an investment fund to date.

The fine relates to the ICAV's breach of its reporting obligation under Article 9(1) of EMIR, which requires details of any derivative contracts to be reported to a registered trade repository no later than the working day after the contract is concluded.

In this case, the ICAV failed to report 200,640 derivative trades entered into by one of its sub-funds between January 2018 and May 2020.

The initial fine was €275,000, though this was discounted by 30% as provided under the EMIR Regulations Settlement Scheme. The Central Bank notes that the ICAV "provided the expected level of cooperation".

It should also be noted that the Board of the ICAV has confirmed that the remediation was at no expense to the ICAV and/or its investors.

Lessons to be learned

The fine underlines how important it is for firms to ensure that

• there is appropriate oversight of data reporting from Board level down, including where this is delegated or outsourced and

• delegation of reporting obligations is appropriately managed so there is no confusion between the delegates as to their respective responsibilities.

The case also highlights the Central Bank's expectation that firms should bring material failures to the regulator's attention at the earliest opportunity and act speedily to address identified issues. Here, the ICAV had identified the breach in May 2020 but only notified the Central Bank in March 2021, following engagement which the Central Bank initiated.

Background

In April 2016, the Board of the ICAV appointed a management company (ManCo) to act as its manager and to which the ICAV delegated its operational compliance. The ManCo in turn delegated responsibility for investment of the ICAV's assets to an investment manager.

Despite these delegations, the ICAV remained responsible for complying with its regulatory obligations.

The ManCo did not make EMIR reports to the Board between April 2016 and August 2019, when, in light of the Central Bank's February 2019 letter to industry on compliance with Article 9 of EMIR, the Board requested the ManCo to review all EMIR reporting on behalf of the ICAV's sub-funds of the ICAV. 

The ManCo confirmed compliance with the EMIR reporting requirement to the ICAV in August 2019, December 2019, February 2020 and April 2020.

In late May 2020, the Investment Manager informed the ICAV and ManCo that there had been a failure to report approximately 21,000 trades entered in to by the Sub-Fund to a relevant trade repository. This figure was revised up to over 200,000 in February 2021, following an internal investigation. As a result, around 194,000 late reports were submitted to a trade repository on or around 26 February 2021.

These late returns drew the Central Bank's attention - on 15 March 2021, the ICAV notified the Central Bank of the failure to report relevant sub-fund trades.

In its letter to the Central Bank of 24 March 2021, the ManCo explained that the delay in notifying the Central Bank was because the Board had intended to do so once all non-reported historic trades had been identified and the backfilling of these trades had been completed.