Due diligence in the selection and appointment of counterparties and prime brokers - AIFMD Provision

AIFMD Anatomy™ →Go uptown {{{2}}} In a Nutshell™ Section 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. view template Full text This is an unoffical transcription, may be wrong, buggered up, out of date etc. You should Google the original. Article DR20 Due diligence in the selection and appointment of counterparties and prime brokers DR20(1). When selecting and appointing counterparties and prime brokers, AIFMs shall exercise due skill, care and diligence before entering into an agreement and on an ongoing basis thereafter taking into account the full range and quality of their services. DR20(2). When selecting prime brokers or counterparties of an AIFM or an AIF in an OTC derivatives transaction, in a securities lending or in a repurchase agreement, AIFMs shall ensure that those prime brokers and counterparties fulfil all of the following conditions: (a) they are subject to ongoing supervision by a public authority; (b) they are financially sound; (c) they have the necessary organisational structure and resources for performing the services which are to be provided by them to the AIFM or the AIF. DR20(3). When appraising the financial soundness referred to in paragraph 2(b), the AIFM shall take into account whether or not the prime broker or counterparty is subject to prudential regulation, including sufficient capital requirements, and effective supervision. DR204. The list of selected prime brokers shall be approved by the AIFM’s senior management. In exceptional cases prime brokers not included in the list may be appointed provided that they fulfil the requirements laid down in paragraph 2 and subject to approval by senior management. The AIFM shall be able to demonstrate the reasons for such a choice and the due diligence that it exercised in selecting and monitoring the prime brokers which had not been listed. view template 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.