Reporting obligations for prime brokers - AIFMD Provision

AIFMD Anatomy™ Go Premium In a Nutshell™ Section DR91: DR91(1). The AIFM must ensure that from the date of any prime broker’s appointment it has agreed to provide the depositary with a statement in a durable medium of: (a) the daily closing values of the items set out in paragraph DR91(3); (b) anything else the depositary of the AIF needs to have up-to-date valuations of assets whose safekeeping has been delegated to the prime broker under Article 21(11). DR91(2). The prime broker must send its paragraph DR91(1) stastement to the depositary no later than the close of the next business day. DR91(3). The items referred to in point (a) of paragraph DR91(1) shall include: (a) the total value of assets held by the prime broker for the AIF, where safe-keeping functions are delegated in accordance with Article 21(11) of Directive 2011/61/EU (EUR Lex). (aa) The value of each of the following: (i) cash loans made to the AIF and accrued interest; (ii) securities owed by the AIF under open short positions; (iii) futures settlement amounts owed by the AIF; (iv) cash proceeds of short sales held by the prime broker; (v) cash margin the prime broker holds for the AIF’s open futures contracts; This obligation is in addition to the obligations under Articles DR87 and DR88; (vi) mark-to-market close-out exposures of the AIF’s OTC transactions; (vii) the AIF’s total secured obligations to the prime broker; and (viii) all the AIF’s other assets with the prime broker; (b) the value of other assets referred to in Article 21(8)(b) that the prime broker holds as collateral for secured transactions entered into under the prime brokerage agreement; (c) the value of the assets the prime broker has rehypothecated; (d) a list of all the institutions where the prime broker holds the AIF’s cash in the AIF’s or AIFM’s name per Article 21(7). view template Full text This is an unoffical transcription, may be wrong, buggered up, out of date etc. You should Google the original. Reporting obligations for prime brokers DR91(1). Where a prime broker has been appointed, the AIFM shall ensure that from the date of that appointment an agreement is in place pursuant to which the prime broker is required to make available to the depositary in particular a statement in a durable medium which contains the following information: (a) the values of the items listed in paragraph DR91(3) at the close of each business day; (b) details of any other matters necessary to ensure that the depositary of the AIF has up-to-date and accurate information about the value of assets the safekeeping of which has been delegated in accordance with Article 21(11) of Directive 2011/61/EU (EUR Lex). DR91(2). The statement referred to in paragraph DR91(1) shall be made available to the depositary of the AIF no later than the close of the next business day to which it relates. DR91(3). The items referred to in point (a) of paragraph DR91(1) shall include: (a) the total value of assets held by the prime broker for the AIF, where safe-keeping functions are delegated in accordance with Article 21(11) of Directive 2011/61/EU (EUR Lex). The value of each of the following: (i) cash loans made to the AIF and accrued interest; (ii) securities to be redelivered by the AIF under open short positions entered into on behalf of the AIF; (iii) current settlement amounts to be paid by the AIF under any futures contracts; (iv) short sale cash proceeds held by the prime broker in respect of short positions entered into on behalf of the AIF; (v) cash margins held by the prime broker in respect of open futures contracts entered into on behalf of the {{aifmdprov|AIF]]. This obligation is in addition to the obligations under Articles DR87 and DR88; (vi) mark-to-market close-out exposures of any OTC transaction entered into on behalf of the AIF; (vii) total secured obligations of the AIF against the prime broker; and (viii) all other assets relating to the AIF; (b) the value of other assets referred to in point (b) of Article 21(8) of Directive 2011/61/EU (EUR Lex) held as collateral by the prime broker in respect of secured transactions entered into under a prime brokerage agreement; (c) the value of the assets where the prime broker has exercised a right of use in respect of the AIF’s assets; (d) a list of all the institutions at which the prime broker holds or may hold cash of the AIF in an account opened in the name of the AIF or in the name of the AIFM acting on behalf of the AIF in accordance with Article 21(7) of Directive 2011/61/EU (EUR Lex). 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) | Comments? 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Applies to full depositary delegations of the safe-keeping function...

Relevant where a depositary delegates the custody/safekeeping function under Art 21(8)(a) to a prime broker. Sets out the reporting that prime broker acting as a delegated custodian has to make to the depositary. It is the AIFM’s responsibility to make sure this happens, and yes, it seems to be one of those regulations imposing an obligation on the parties to have a contract to do something, rather than simply mandating it as a matter of compulsory regulation. There should be a name for regulations like this. Other than just “bone-headed”, of course.

...does not apply to depo lites

Not relevant in a depo-lite situation (which applies to certain Non-EU AIFs, where there is not a depositary in the first place, and delegation is not happening. When you think about it, it can’t really apply to a depo lite, since by definition there is no depositary for the prime broker to make any of these reports to.

Don’t put this in the prime brokerage agreement

Assiduous lawyers might want this put in your prime brokerage agreement. Seeing as the natural counterparties to this agreement are the PB, on one hand, and the depositary or AIFM on the other hand (neither of which is likely to be a party to the prime brokerage agreement - usually that is the PB and the AIF itself), try to resist this.

See also

• Delegation of depositary’s functions - AIFMD Provision
• Depo-Lite - AIFMD Provision