Template:Aifmddepositarydelegation

Delegation of depositary’s functions

You will see the depositary role in toto is not really suitable for a prime broker. The depositary may delegate some of its functions however: A prime broker may act as:

• custodian, but will have certain conditions to that appointment (see Article 21(11)
• A "depositary lite" to certain non-EU domiciled AIFs

A depositary can only delegate in certain circumstances:

• It must have an “objective reason” for the delegation.
• it must exercise due skill, care and diligence in the selection, appointment and ongoing monitoring of the sub-custodian;
• The sub-custodian to whom it delegates:
  • must have structures and expertise proportionate to the nature, scale and complexity of the assets of the AIF
  • must be subject, in acting as a custodian, to effective prudential regulation and supervision in its local jurisdiction and periodic external audits;
  • must segregate AIF assets from its own and the depositary's assets
  • may not reuse the AIF’s assets without the AIF's express consent.