Irish Quarterly Legal And Regulatory Report: October - December 2025

1. AIFMD & UCITS DEVELOPMENTS

1.1 European Commission (the "Commission") adopts delegated regulations on liquidity management tools under AIFMD and UCITS Directive (This is a further update to section 1.3 of the quarterly report covering the second quarter of 2025)

On 17 November 2025, in a welcome development the Commission adopted its proposed regulatory technical standards ("RTS") relating to the use of liquidity management tools ("LMTs") by open-ended AIFs and UCITS.

The Delegated Regulations make targeted clarifications to the RTS contained in ESMA's final report submitted to the Commission in April 2025.

The Commission adopted the following Delegated Regulations, which contain the RTS supplementing AIFMD and the UCITS Directive:

• Delegated Regulation on RTS specifying the characteristics of liquidity management tools (LMTs) under AIFMD. These RTS reflect a mandate in Article 16(2)(g) of AIFMD.
• Delegated Regulation on RTS specifying the characteristics of LMTs under the UCITS Directive. These RTS reflect a mandate in Article 18(a)(3) of the UCITS Directive.

The RTS specify the characteristics of the LMTs set out in the Annexes to the AIFMD and the UCITS Directive, under Directive 2024/927/EU ("AIFMD II").

The adopted RTS are substantially aligned with those draft RTS contained in ESMA's report. The RTS introduce a number of targeted clarifications (in particular, in relation to redemption gates and redemption fee calculations as outlined below).

Redemption gates

For AIFs, the threshold for activating a redemption gate may now be set at investor level (an investor-level gate), at fund level (a fund-level gate), or as a combination of both.

For UCITS, activation remains at the level of the UCITS, and the threshold applies equally to all investors of the UCITS.

Under both regimes, the activation threshold can be assessed either over a specified period (a rolling window) or for a given dealing day.

Redemption fees, swing/dual pricing, anti-dilution levies ("ADLs") (collectively anti-dilution tools ("ADTs"))

Where ADT LMTs are used, estimated explicit transaction costs must be included within the predetermined costs range. They should also include or take into account the implicit transaction costs where appropriate to the investment strategy. Implicit transaction costs may now also be estimated on a "best-efforts basis".

Both sets of RTS are set to apply from 16 April 2026 and allow a one-year transitional period for existing AIFs and for existing UCITS (constituted before 16 April 2026) to comply with the RTS until 16 April 2027. Individual AIFs or UCITS may choose to be subject to the RTS from 16 April 2026, provided that they notify the national competent authority ("NCA") of their home Member State.

The Council of the EU (the "Council") and the European Parliament (the "Parliament") will now scrutinise the Delegated Regulations. If neither object, the Delegated Regulations will enter into force 20 days after their publication in the Official Journal of the EU ("OJ") and apply from 16 April 2026.

Walkers' Asset Management and Investment Funds group have published an advisory, which outlines the key changes, next steps and other relevant considerations in the application of the LMT rules under AIFMD II.

1.2 ESMA amended LMT guidelines (This is a further update to section 1.3 of the quarterly report covering the second quarter of 2025)

On 18 December 2025, ESMA published its report on Amended Guidelines on LMTs of UCITS and open-ended AIFs ("Amended Guidelines") which takes into account the adoption of the RTS on LMTs (outlined at section 1.1 of this report).

To ensure full consistency between the Amended Guidelines and the RTS as adopted, ESMA has made targeted amendments to the original draft guidelines, primarily in relation to redemption gates and transaction costs for anti-dilution LMTs.

On redemption gates, the Amended Guidelines now reflect the final RTS whereby managers of AIFs with no retail investors and with a limited number of professional investors should consider investorlevel redemption gates, alone or in combination with fund-level gates, to mitigate first mover advantage.

On transaction costs for anti-dilution LMTs, the Amended Guidelines reflect the final RTS whereby estimated costs of liquidity are required to include explicit transaction costs and the inclusion of implicit transaction costs, should be considered, only where appropriate to the investment strategy and estimated on a best effort basis.

The Amended Guidelines in Annex I of the report will be translated into the official EU languages and published on the ESMA website. The publication of the translations will trigger a two-month period during which NCAs must notify ESMA whether they comply or intend to comply with the Amended Guidelines.

The Amended Guidelines will apply upon the application date of the RTS (16 April 2026) and managers of funds existing before this date of application may apply these Amended Guidelines, in respect of those funds, after twelve months from that application date (16 April 2027).

1.3 ESMA peer review on the supervision of depositary obligations

On 17 November 2025, ESMA published its findings following a peer review which assessed the supervision of depositaries, in particular their oversight and safekeeping obligations (the "Review"). The Review focused on five jurisdictions: Czechia, Ireland, Italy, Luxembourg and Sweden and examined the supervisory and enforcement practices of these NCAs across key areas of depositary business activities.

Overall, the peer review found that the foundational frameworks for the supervision of depositaries are in place. However, it also found notable divergences across jurisdictions in terms of the depth and maturity of supervisory approaches. While some NCAs demonstrated highly developed and granular practices, others displayed areas for improvement. In addition, there were several transversal findings, including:

• The need for supervisory engagement to be more frequent and proportionate to the associated risk, given the concentration of depositaries within the markets of the assessed NCAs and their potential systemic significance.
• Concerns regarding the depth and intrusiveness of the supervisory assessments of several NCAs with respect to depositaries entrusting third parties with significant tasks, bearing in mind the obligation of depositaries to perform control-related activities autonomously.

Recommendations

ESMA's peer review committee ("PRC") issued targeted recommendations under each assessed supervisory expectation, which may be subject to follow-up within two years. Key recommendations to relevant NCAs on their approaches to depositary supervision include:

• Enhancing risk-based supervision: The Review recommends relevant NCAs to enhance their approach to depositary supervision, so that risks inherent in their activities are adequately identified, assessed and mitigated. In particular, the PRC expects that all assessed NCAs consider implementing more frequent and intrusive engagement to higher impact entities and therefore move closer to a true risk-based supervisory approach.
• Strengthening delegation function: The PRC seeks a thorough assessment that depositary oversight functions are not delegated and whether any envisaged arrangements with third party service providers are in line with the criteria outlined in the ESMA Q&As on the matter, through the review of sample reports, Key Performance Indicators (KPIs), contracts/SLAs and conduct of onsite inspections at large service providers
• Safekeeping and asset segregation: The PRC observed that the Central Bank of Ireland (the "Central Bank") does not require its depositaries to maintain first-level accounts where the safekeeping function is delegated. This practice diverges from that of the other four NCAs and markets covered. The PRC did not find evidence for in-depth supervisory assessments by the Central Bank concerning the compatibility of their unique custody model with applicable EU rules following the 2020 legislative amendments and therefore has encouraged the Central Bank to review its assessment.

Next steps

The objective of peer reviews is to promote consistent and effective supervisory practices across the EU and high-quality supervisory outcomes, as well as to foster a level playing field among NCAs. In that context, the report intends to aid all NCAs in their supervision of depositaries, and it is particularly relevant considering the ongoing discussion on the importance of the investment management sector to European capital markets. ESMA will continue promoting further discussion on the supervision of depositaries and will follow up on specific open recommendations in due course.

Walkers Asset Management and Investment Funds group have produced an advisory analysing the Review's findings.

1.4 Commission questions and answers ("Q&As") on ELTIF framework

On 5 December 2025, the Commission adopted responses to a number of questions forwarded to it by ESMA to provide clarity on certain legislative provisions contained in the ELTIF 2.0 framework.

The reference numbers and subject matter of the new ELTIF Q&As, as published on the ESMA Q&A tool webpage are as follows:

• 2468 (Indirect investment);
• 2470, 2471 (Investment strategy);
• 2472,2474,2475,2476,2477,2478, 2482 (Redemption policy);
• 2479 (Matching mechanism);
• 2480 (Benefitting from the distributions of the ELTIF); and
• 2481 (Nationality-related eligibility restrictions on ELTIFs stemming from national law).

ID 2468 acknowledges the role of intermediary entities in facilitating ELTIF investments, and clarifies the application of a number of provisions where investments are made via intermediary entities including that:

• intermediary entities do not need to meet the qualifying portfolio undertaking criteria,
• ELTIF portfolio composition and risk-spreading requirements should apply on a look through basis, and
• intermediary entities and aggregator vehicles should not automatically be considered an AIF. ID 2470 confirms that ELTIFs can invest:
• in non-EU AIFs under the UCITS assets bucket referred to in Article 50(1) of the UCITS Directive (Article 9(1)(b) of the ELTIF Regulation).
• In eligible target funds that provide exposure to assets even if the assets do not meet the eligibility criteria laid down in Article 9(1) of the ELTIF Regulation. The Q&A clarifies that the look-through approach applies to the determination of relevant limits and does not extend or apply to the eligibility of assets defined in Article 9 and Article 10 of the ELTIF Regulation.

ID2481 confirms that national law cannot require master/feeder ELTIFs to be established in the same jurisdiction.

1.5 ESMA final report on draft RTS on open-ended loan originating AIFs ("OE LOFs") under Directive (EU) 2024/927) ("AIFMD II") (This is a further update to section 1.1 of the quarterly report covering the fourth quarter of 2024)

On 21 October 2025, ESMA published its final report to the Commission with draft RTS on OE LOFs under AIFMD II.

Level 1 of AIFMD II provides that "a loan-originating AIF may be open-ended provided that the AIFM that manages it is able to demonstrate to the competent authorities of the home Member State of the AIFM that the AIF's liquidity risk management system is compatible with its investment strategy and redemption policy."

ESMA was mandated to develop draft RTS to determine the requirements that OE LOFs must comply with to maintain an open-ended structure.

The feedback statement notes that the main point raised by respondents concerned the requirement for alternative investment fund managers ("AIFMs") to determine an appropriate proportion of liquid assets that OE LOFs must hold to meet redemption requests. ESMA has revised the draft RTS by removing this 'fixed asset' requirement and instead stipulated that AIFMs must ensure their OE LOFs have sufficient liquidity to honour redemption requests.

ESMA also updated the draft RTS to require that AIFMs managing OE LOFs must carry out liquidity stress tests at least once a year, rather than quarterly as previously proposed in the consultation paper.

The final draft RTS are set out in Annex IV to the report, which sets out the requirements that OE LOFs must comply with, as follows:

• sound liquidity management system;
• availability of liquid assets and stress testing;
• appropriate redemption policy having regard to the liquidity profile of OE LOFs; and
• a list of factors that AIFMs must consider when determining the redemption policy and assessing the liquidity of OE LOFs.

ESMA has submitted the draft RTS to the Commission. As explained in an accompanying press release, the RTS are included on the list of the non-essential Level 2 acts that the Commission has recently deprioritised and will not adopt before 1 October 2027 at the earliest.

Walkers Asset Management and Investment Funds group have produced an advisory entitled ESMA publishes final report and draft RTS on OE LOFs breaking down the finalised RTS and highlighting the practical implications for AIFMs against the backdrop of recent de-prioritisation by the Commission.

2. CENTRAL BANK UPDATES

2.1 Feedback statement to CP160 and updated Fitness & Probity ("F&P") Guidance (This is a further update to section 2.4 of the quarterly report covering the second quarter of 2025)

On 24 November 2025, the Central Bank published the following:

• feedback statement on CP160 on amendments to the F&P regime; and
• updated Guidance on the Standards of Fitness and Probity (effective from 25 November 2025) ("F&P Guidance").

The revised F&P Standards consolidate the existing F&P Standards and the F&P Standards for Credit Unions 2024 into one set of Fitness and Probity Standards.

The F&P Guidance consolidates all F&P-related materials (including prior FAQs, Dear CEO letters, and sectoral notes) into a single Guidance document to deliver a clearer, more transparent framework.

Overview of relevant changes from the draft guidance in CP160

A number of changes have been made in the updated F&P guidance (from the draft April 2025 version contained in CP160), including:

Temporary Officers

Further detail is provided on the new streamlined approach to the appointment of Temporary Officers, where a pre-approval controlled function ("PCF") role becomes vacant. A Temporary Officer is permitted to perform a PCF role by way of an arrangement agreed in writing with the Central Bank, for a period of up to 6 months upon certain conditions being satisfied (2.41). Temporary Officers are treated as CF-1 and are subject to the F&P Standards and the Common and Additional Conduct Standards.

Dual CF/PCF classifications

All individuals occupying PCF roles can be said to have the 'ability to exercise a significant influence on the conduct of the affairs' of a firm and are therefore, at minimum, also CF-1. There are no new requirements or expectations associated with this dual classification. Specifically, dual classification does not introduce any additional due diligence for PCFs. Moreover, where a firm certifies that an individual complies with the standards of fitness and probity in respect of a PCF role, the firm does not have to make certifications in respect of the CF-1 (or CF-2) aspects of that role.

The role of company secretary

The company secretary is not automatically considered a CF-1 role holder. The designation of a company secretary as a CF-1 should be determined by firms on a case-by-case basis, where the functions carried out by the individual enable them to exercise a significant influence on the conduct of the affairs of the firm. The Central Bank anticipates that CF-1 roles holders are relatively senior individuals in firms. Where a firm determines that the role conducted by their company secretary is purely the administration of company law matters, such individuals need not, for those activities alone, be designated as CF-1.

CF-2

Where the functions performed by an individual constitute 'ensuring, controlling or monitoring' compliance by a regulated financial service provider with its relevant obligations, that individual is occupying a CF-2 role, regardless of their seniority. CF-2 role does not extend to administrative/support staff, including in outsourced internal audit arrangements.

F&P due diligence expectations

Firms are expected to apply a proportionate approach performing due diligence on a best-efforts basis, mindful of the limits of public records. The principle of proportionality cannot be applied in relation to probity, and the assessment must be conducted for all firms in the same manner.

In relation to considering past events in the context of F&P assessments recognises that the significance of past events may diminish over time. A ten-year period since a final decision is provided as a general guide to the diminishing materiality of past events (unless custodial sentences or aggravating factors apply). Firms should still seek information on criminal, civil or regulatory actions in respect of an individual regardless of when they occurred.

Reference to providing "evidence of financial soundness" has been removed. The Central Bank does not expect applicants to provide bank statements. In general, absence of judgments/defaults and public record checks will suffice unless there are further disclosures made by the applicant or concerns arise that warrant investigation.

Capacity / time commitments

In relation to the assessment of time commitments, the Central Bank reaffirms that case-by-case assessments will be made based on the firm and the role in question. The F&P Guidance contains a number of factors to consider e.g., other directorships, other CF/PCF roles, other mandates and the responsibilities attached to those mandates.

The default expectation that executive PCF roles are are carried out on a full-time basis is removed. Firms should be in a position to explain non full-time executive arrangements.

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