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Ireland’s updated funds regulations should ensure that the country’s investment industry continues to flourish, says Mark Browne

The Irish Financial Services Regulatory Authority (the ‘Financial Regulator’) has recently issued a new Guidance Note on the valuation of assets of money market funds (Guidance Note 1/08) and revised related aspects of the existing Guidance Note 1/00 on the valuation of the assets of collective investment schemes. These changes update and further boost the regulatory regime applicable to investment funds in Ireland.

Collective investment schemes (CIS) established in Ireland are subject to both applicable Irish statutory legislation and the relevant requirements of the Financial Regulator, which is set out in the Undertakings for Collective Investments in Transferable Securities (UCITS) and Non-UCITS Notice and its guidance notes (the Guidance Notes). The Guidance Notes are issued by the Financial Regulator from time to time to provide direction on legal, regulatory and operational issues relating to the funds industry in Ireland. They either follow consultation with the funds industry itself or are issued in response to specific market issues. Adherence to the Guidance Notes is normally mandatory, subject to a specific derogation, if available. The Guidance Notes are drawn up after consultation with the funds industry in Ireland, particularly through the input of committees of the Irish Funds Industry Association (IFIA) – a representative body comprising members of the industry’s various service providers, including legal and accounting firms with appropriate expertise.

Recent turmoil in the global equity and commodity markets has augmented the importance of money market funds, with investors increasingly seeking the relative safety they offer. At the same time, the ongoing global credit crunch has highlighted awareness of the importance of ensuring that appropriate valuation policies are applied. The New Guidance Notes seek to address both of these issues by specifically setting out the requirements of the Financial Regulator in relation to the appropriate policies for money market funds.

The Financial Regulator initially issued a consultation paper in December 2007 with draft proposals for the New Guidance Notes. Following extended consultation with industry representatives, final versions were issued in August of this year.

The New Guidance Notes

Under the provisions of the New Guidance Notes only funds that meet certain criteria are permitted to use the amortised cost valuation method of valuation and/or to use the term ‘money market fund’ in their title. The conditions that must be satisfied are:

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