Depositary lite - AIFMD Provision

AIFMD Anatomy™ →Go uptown In a Nutshell™: 21(7) Depositary obligations re cash: The depositary must ensure that: AIF’s cashflows are properly monitored; and subscription payments are properly received and all cash booked in the depositary’s accounts at a suitable bank 21(8): Depositary's obligations re safekeeping of assets: AIF’s assets are entrusted to the depositary for safekeeping as follows: (a) Custody Assets: Depositary should hold in custody all assets that can be registered in its books or physically delivered to it; within segregated accounts in its books opened in the name of the AIF or AIFM (b) Non-custody assets: for non-custody assets there are some rules too. 21(9) Issuance and cancellation of fund units etc.: depositary must look after issue and cancellation of shares and units, calculation of NAVs and so on. Directive 2011/61/EU (EUR Lex) | Implementing regulation 231/2013 (EUR Lex) Navigation directive - 21 (depositary) | 21(4) (conflict management) | 21(8) (custody function) | 21(11) (custody delegation) | 21(12) (liability for loss of assets) | 21(13) (discharge of liability on delegation) | 21(14) (discharge of liability for Non-EU subcustodians) | 36 (depo-lite) | 36(1) implementing regulation DR20 (Due diligence when appointing counterparties and prime brokers) | DR76 (objective reason) | DR89 (Safekeeping duties with regard to assets held in custody) | DR91 (reporting obligations for prime brokers) | DR98 (due diligence) | DR99 (segregation obligation) | DR100 (Loss of custody asset) | Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

Non-EU AIFs marketed by an EU AIFM to EU investors through private placement are subject to certain somewhat diminished depositary requirements (Article 36 AIFMD). Unlike Article 21 (which covers the full depositary obligations of an EU AIFM/EU AIF) there is no strict liability for loss of assets for a non-EU AIF, and no requirement to appoint a single depositary - therefore this regime is referred to as "Depositary-Lite" or "Depo-Lite".

An AIFM must ensure one or more entities are appointed to carry out the following duties of cash flow monitoring, safe-keeping and oversight. In a Nutshell™:

Paragraph 36, AIFMD

AIFMD, 36
Article 36 Conditions for the marketing in Member States without a passport of non-EU AIFs managed by an EU AIFM
36(1). Without prejudice to Article 35, Member States may allow an authorised EU AIFM to market to professional investors, in their territory only, units or shares of non-EU AIFs it manages and of EU feeder AIFs that do not fulfil the requirements referred to in the second subparagraph of Article 31(1), provided that:

(a) the AIFM complies with all the requirements established in this Directive with the exception of Article 21. That AIFM shall however ensure that one or more entities are appointed to carry out the duties referred to in Article 21(7), 21(8) and 21(9). The AIFM shall not perform those functions. The AIFM shall provide its supervisory authorities with information about the identity of those entities responsible for carrying out the duties referred to in Article 21(7), 21(8) and 21(9);

(b) appropriate cooperation arrangements for the purpose of systemic risk oversight and in line with international standards are in place between the competent authorities of the home Member State of the AIFM and the supervisory authorities of the third country where the non-EU AIF is established in order to ensure an efficient exchange of information that allows the competent authorities of the home Member State of the AIFM to carry out their duties in accordance with this Directive;

(c) the third country where the non-EU AIF is established is not listed as a Non-Cooperative Country and Territory by FATF.

36(2). Member States may impose stricter rules on the AIFM in respect of the marketing of units or shares of non-EU AIFs to investors in their territory for the purpose of this Article.
36(3). The Commission shall adopt, by means of delegated acts in accordance with Article 56 and subject to the conditions of Articles 57 and 58, measures regarding the cooperation arrangements referred to in paragraph 1 in order to design a common framework to facilitate the establishment of those cooperation arrangements with third countries.
36(4). In order to ensure uniform application of this Article, ESMA shall develop guidelines to determine the conditions of application of the measures adopted by the Commission regarding the cooperation arrangements referred to in paragraph 1.

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