The Central Bank has fined Sarasin Funds Management (Ireland) €385,000 for four admitted breaches of investment funds regulations between May 2017 and March 2018.
Sarasin Funds Management is authorised by the Central Bank as an Undertakings for Collective Investment in Transferable Securities (UCITS) fund management company and is managed by a board of non-executive directors.
It uses a delegation model, where a number of fund management functions are delegated to external service providers, subject to ongoing monitoring by specific directors and the board of the company.
Among its delegations, the company delegates investment management services to an investment manager (the Investment Manager) and delegates the depositary function to a depositary (the Depositary).
The bank started its investigation after a disclosure in August 2017 by the Depositary, in accordance with its statutory reporting obligation, about an advertent breach of investment restrictions.
In the course of investigating the circumstances surrounding the advertent breach of investment restrictions, the Central Bank also found governance and oversight of delegates breaches.
Seána Cunningham, the Central Bank's Director of Enforcement and Anti-Money Laundering, said that each fund management company is authorised by the Central Bank on the basis of its business plan, which sets out how the board will meet its legal and regulatory obligations.
"Regardless of any delegation of its functions, a fund management company remains responsible for compliance with its regulatory obligations," she said.
The Central Bank expects boards and designated directors to proactively challenge the activities and scrutinise the actions taken by their delegates, to be able to adequately oversee and monitor their delegates at all times, and to tailor their governance, oversight and monitoring programme appropriately when risks arise.
The company failed in this regard, she stated.
"The firm did not seek updates from its delegate on the progression of the merger of two funds, despite the merger's attendant risks. More generally, the firm and its delegates were not following the reporting and communication procedures outlined in the firm's own business plan," Ms Cunningham said.
She also said that the board did not challenge its delegates' failure to provide it with adequate information and did not act to correct these deficiencies.
"It is a particularly troubling finding of this investigation that the Board had confirmed on a number of occasions in the minutes of its own meetings that it had received certain delegate reports when in fact it had not. This falls well below the level of challenge and scrutiny required of the Firm to meet its regulatory obligations," she added.
The Central Bank’s Director of Enforcement and Anti-Money Laundering said that effective compliance with the regulatory requirements placed on fund management companies is key to ensuring good governance, effective management and good organisation for the protection of investors, the integrity of the market and to promote systemic stability.
"Compliance by the industry with these requirements will continue to be an area of focus for the Central Bank," she added.
The Central Bank said it had determined the appropriate fine for the breaches to be €550,000, which was reduced by 30% to €385,000 in accordance with the settlement discount scheme provided for in its Administrative Sanctions Procedure.
