On 14 February 2025, the European Securities and Markets Authority (“ESMA“) launched a new Common Supervisory Action (“CSA“) focused on Compliance and Internal Audit Functions within fund management companies. See ESMA’s notice here – ESMA launches a Common Supervisory Action with NCAs on Compliance and Internal Audit Functions.

ESMA’s CSA will focus on assessing the extent to which UCITS management companies and Alternative Investment Fund Managers (“AIFMs“) have established effective compliance and internal audit functions with the adequate staffing, authority, knowledge, and expertise to perform their duties under the AIFM and UCITS Directives. ESMA notes that compliance and internal audit functions are designed to ensure that the internal control mechanisms to monitor, identify, measure, and mitigate any possible risks of non-compliance with the applicable rules are in place.

In response to the new CSA launch, the Central Bank of Ireland (the “Central Bank“) has begun its review of Irish fund management companies’ Compliance and Internal Audit Functions with questionnaires issuing this week to selected entities. Responses are due by mid-March and details of the submission process are in the communications issued by the Central Bank.

This CSA questionnaire issued by the Central Bank covers:

• Compliance Policy & Procedure Measures
• Assignment of Compliance Responsibilities
• Conditions enabling the compliance function to perform
• Compliance Reporting to Senior Management
• Compliance Monitoring Plans
• Internal Audit Responsibilities, controls, and delegation
• Internal Audit Reporting to Senior Management
• Internal Audit Plans

The Compliance and Internal Audit Function CSA will continue throughout 2025 and in keeping with the common assessment framework, it is anticipated that the Central Bank will schedule on-site engagements for selected entities during the year. Meanwhile, ESMA has committed to publishing a final report in 2026, following which the Central Bank may publish its findings and actions.

Whether you require expert legal guidance or support, are looking for insights into the expectations of the Central Bank, or practical support in the design and structure of your internal audit or compliance functions, Arthur Cox is here to help. Please contact your usual Arthur Cox contact, Denise Murray or the Governance and Consulting Services team for more details.