On 8 September 2016, the Central Bank of Ireland issued a letter to the chairs of investment funds companies, outlining the findings of its thematic review on the additional directors’ time commitments associated with managing sub-funds. This review resulted from the Central Bank’s earlier (June 2015) thematic review of directors’ time commitments, which found that a further, detailed analysis of the sub-funds within a directors’ portfolio was required.
To conduct this follow-up review, the Central Bank analysed board packs and minutes of board meetings. The findings indicated that there was significant variance in the amount of time directors’ were allocating to sub-funds, ranging from between 2 to 11 hours per sub-fund. Factors identified as impacting the time allocation required for each sub-fund included:
In its letter, the Central Bank noted that it considers that the responsibilities associated with managing high levels of sub-funds are significant. Therefore, when assessing their capacity to effectively fulfil their role, directors are expected to:
Where an individual director has aggregate time commitments in excess of 2000 hours, including commitments to at least 20 fund boards, the Central Bank would consider that director to be at high risk of being unable to fulfil his/her board role to the appropriate standard. The Central Bank will also continue to engage as required with directors who are identified as having high aggregate time commitments and directorship numbers.
Companies are reminded that ultimate responsibility for all regulatory obligations and related guidance rests with the board and the individual directors. Therefore boards and individual directors should have regard to the Central Bank’s guidance on assessing directors’ time commitments, which the Central Bank will take into account when exercising its regulatory and enforcement powers where breaches of the relevant regulatory requirements are identified.
Boards are advised to review their current composition and ensure that: