It is the first fine the Central Bank has ever imposed on an investment fund. The bank has previously fined fund management companies.
The infringement comes under the EU’s market infrastructure regulation (EMIR), which requires derivatives contracts – complex financial instruments whose value is based on an underlying commodity or asset – to be reported to a centralised repository by the next working day.
The fund, GlobalReach Multi-Strategy ICAV, admitted that it failed to report 200,640 derivative trades entered into between January 2018 and May 2020 by one of its sub-funds.
The Central Bank had set a fine of €275,000, but reduced it by 30pc to €192,500 as allowed by the discount scheme under EU rules.
“This case highlights the importance of timely and accurate data reporting,” said Seána Cunningham, the Central Bank’s director of enforcement and anti-money laundering.
“Firms must have appropriate oversight of data reporting from board level down, including where data reporting is delegated or outsourced.
“The delegation of reporting obligations must be appropriately managed in order to avoid confusion between the delegates as to their respective reporting responsibilities. Incomplete or inaccurate data actively hinders market monitoring processes and activities.”
Ms Cunningham said the bank expects firms to bring any failures to its attention “at the earliest opportunity”.
She noted that the fund had only notified the Central Bank of its reporting failure “following engagement initiated by the Central Bank”.
GlobalReach is a Central Bank-authorised fund which does not have any employees but is managed by a board of directors.
The board hired a management company to handle its operational compliance with all applicable laws. The management company then delegated responsibility for the fund’s investments and reporting obligations to an investment manager.
While the management company had been reporting that the fund was complying with its obligations, the investment manager revealed in 2020 – following a Central Bank letter to the wider industry to remind them of their obligations under EMIR – that 21,000 derivatives trades had not been reported. Following an internal investigation, that number climbed to over 200,000.
The fund informed the Central Bank of the trades in March 2021 after the bank queried them.
Under EU rules, GlobalReach is ultimately responsible for all of the activities of its management company and investment manager, and is liable for any breaches of EU rules.
The Central Bank said it was “satisfied” that GlobalReach had “remediated” the failing. The fund said the the remediation was at no expense to its investors.
Derivatives backed by mortgages were a major cause of the 2008 crash.
