Template:Nutshell AIFMD DR20

Article DR20 - Due diligence in the selection and appointment of counterparties and prime brokers
DR20(1). When selecting and monitoring counterparties and prime brokers, AIFMs must exercise due skill, care and diligence considering the full range and quality of their services.
DR20(2). In the context of OTC derivatives transaction, in a securities lending or in a repurchase agreement, AIFMs must ensure prime brokers and counterparties:

(a) are appropriately regulated and supervised;

(b) are financially sound;

(c) have the necessary organisational structure and resources to carry out their services.

DR20(3). When appraising their financial soundness the AIFM must consider whether the entity in question is subject to prudential regulation, capital requirements and effective supervision.
DR20(4). The AIFM’s senior management must approve the list of selected prime brokers. In exceptional cases prime brokers not included in the list may be appointed provided that they fulfil the requirements laid down in paragraph DR20(2) and subject to approval by senior management. The AIFM must be able to demonstrate the reasons for such a choice and the due diligence it exercised when selecting and monitoring any such prime broker.