"Supervision matters in the funds industry", Director of Markets Supervision Gareth Murphy

Speaking at the 5th Annual Funds Conference the Central Bank of Ireland’s Director of Markets Supervision, Gareth Murphy, said that, "if previous years were about major policy debates which lead to the writing of rules to deliver a framework for a safer investment funds industry, the coming years should be about implementing effective supervisory approaches, building a stronger culture of compliance focussed on investor outcomes and ensuring that financial authorities have the framework in place to identify risks and take appropriate action."

Murphy highlighted concerns about the effectiveness of funds' disclosures in relation to fees and charges: “Effective disclosure is at the heart of investor protection. With the prospectus and the KIID, there is a clear framework for funds to make these disclosures. However, it is not clear that the communication of this information is leading to an outcome whereby investors are efficiently discriminating between funds."

He also spoke about the growing potential for cyber risk, highlighting that this "requires an ongoing commitment from both financial authorities and regulated entities as the threat adapts and evolves" and it will be "an area of supervisory concern for years to come since all firms' operations are increasingly dependent on information technology."
Murphy indicated that stress-testing of investment funds was an area of increasing focus. Highlighting the differences between bank and investment fund stress tests, he indicated that this work would support an

• understanding of the adequacy of liquid asset buffers at a micro- and macro-level;
• analysis of the potential feedback loop between redemption-driven NAV reductions and subsequent redemptions; and
• estimation of the impact that investment fund redemptions may have on specific asset markets.

In relation to hedge fund leverage, he pointed out that the definition of leverage may need to be refined before powers to limit leverage in AIFMD are made operational.