Depositary lite - AIFMD Provision: Difference between revisions

Jump to navigation Jump to search

Depositary lite - AIFMD Provision (view source)

Revision as of 17:14, 23 September 2021

2,110 bytes added ,  23 September 2021
no edit summary
No edit summary
No edit summary
 
(6 intermediate revisions by the same user not shown)
Line 1: Line 1:
{{aifmdanat|36}}
{{aifmdanat|36|
For EU AIFMs that market non-EU AIFs to professional investors in the EU, AIFMD does away with the need for the fund to have a full-blown [[Depositary - AIFMD Provision|depositary]], but you do need to monitor cash flows, look after [[custody]] assets and manage [[subscription|subscriptions]] and [[redemption|redemptions]].  
[[File:Texas book depository.png|450px|frameless|center]]
}}For EU AIFMs that market non-EU AIFs to professional investors in the EU, AIFMD does away with the need for the fund to have a full-blown [[Depositary - AIFMD Provision|depositary]], but you do need to monitor cash flows, look after [[custody]] assets and manage [[subscription|subscriptions]] and [[redemption|redemptions]].  


These three functions don’t have to be carried out by the same dude. An administrator might handle [[subscription]]s and [[redemption]]s and cashflow monitoring, and a [[prime broker]] might handle the [[custody]] function. When a prime broker does this, we call this a “depositary lite”, or “depo-lite” function. Unlike a full-blown {{aifmdprov|depositary}}, a depo-lite does ''not'' have strict liability for loss of a {{aifmdprov|Non-EU AIF}}’s  assets, but it still has to give some commitments, and — it being the labyrinthine European Union and everything — these are described in a convoluted way, involving  
These three functions don’t have to be carried out by the same dude. An administrator might handle [[subscription]]s and [[redemption]]s and cashflow monitoring, and a [[prime broker]] might handle the [[custody]] function. When a prime broker does this, we call this a “depositary lite”, or “depo-lite” function. Unlike a full-blown {{aifmdprov|depositary}}, a depo-lite does ''not'' have strict liability for loss of a {{aifmdprov|Non-EU AIF}}’s  assets, but it still has to give some commitments, and — it being the labyrinthine European Union and everything — these are described in a convoluted way, involving  
Line 15: Line 16:
AIFMD, like many financial services regulations, is composed of a directive, but is supported by regulatory technical standards imposed by regulation. I’m sure there was a good reason for this, but I don’t have the energy to find out what it was.
AIFMD, like many financial services regulations, is composed of a directive, but is supported by regulatory technical standards imposed by regulation. I’m sure there was a good reason for this, but I don’t have the energy to find out what it was.


Now: AIFMD’s depositary lite regime is designed for ''innie'' fund managers — those resident ''inside'' the EU — marketing ''outie'' funds — funds incorporated ''outside'' the EU — to ''innie'' investors, resident in the EU.  
===== Basis between “Non-EU AIF” and “third country AIF”? We don’t think so. =====
AIFMD’s depositary lite regime is designed for ''innie'' fund managers — those resident ''inside'' the EU — marketing ''outie'' funds — funds incorporated ''outside'' the EU — to ''innie'' investors, resident in the EU.


UK, of course, used to be an innie, and the idea is, as nearly as possible, for all the damage Brexit has done, we remain an innie afterwards, with harmonised alternative fund management regulation. But there’s a little gap: a UK domiciled fund is an ''innie'' for UK AIFMD, but an ''outie'' for EU AIFMD. But conversely, an fund domiciled in the EU is an ''innie'' for the EU, but ''also an innie'' for the UK, because a “third country” AIF means one resident outside the EEA.
UK, of course, used to be an innie, and the idea is, as nearly as possible, for all the damage Brexit has done, we remain an innie afterwards, with harmonised alternative fund management regulation.  


==Depo-lite in general==
But there’s a little gap: a UK domiciled fund is an ''innie'' for [[UK AIFMR]], but an ''outie'' for EU AIFMD. But conversely, an fund domiciled in the EU is an ''innie'' for the EU, but ''also an innie'' for the UK, because a “third country” AIF means one resident outside the EEA.
'''Liability''': 


For all these reasons this regime for  {{aifmdprov|Non-EU AIF}}s is referred to as “{{aifmdprov|Depositary-Lite}}” or “{{aifmdprov|Depo-Lite}}” regime.
Now a “third country AIF” under UK regulations means one outside the UK ''and the EEA.'' But a “Non-EU AIF’ under AIFMD means just one outside just the EEA. So a UK-domiciled AIF would ''not'' be a “[[third country AIF]]”, but it ''would'' be a “[[Non-EU AIF - AIFMD Provision|Non-EU AIF]]’. This did my head in for a short while but the upshot is that ''this does not matter''. Here is why:
 
Under EU [[AIFMD]], a UK AIF marketed under national private placement rules would qualify for EU depo-lite treatment, but it would ''not'' qualify for depo-lite treatment under UK rules — being its own primary regulation — so would have to appoint a full depositary the same way a fully blown EU AIF would anyway. The UK is saying, effectively, “''my'' Non-EU AIFs will behave as if they were EU AIFs, even though the EU regulations don’t require them to, because I require them to”.
 
Which is nice.
 
===Appointment language===
You could, and many fastidious [[legal eagles]] will, descend into the pit of a cavernous drafting oubliette trying to explain exactly what a depositary lite does — the interplay between full depositaries and custody only, and full and lite depositary status is enough to send many of them into a funk; interjecting mirroring UK legislation into the game will put them into a bottomless pit of despair. In a fit of affection, we humbly offer the following:
{{quote|'''Depositary lite''': <br>
(a) Where, for the purposes of the Alternative Investment Fund Managers Regulations 2013 (“'''UK AIFMR'''”), you are a “third country AIF” you may appoint us to act as your “Article 36 custodian”. We will carry out that appointment according to prevailing regulations and technical standards as they apply to Article 36 custodians. <br>
(b) Where the EU Alternative Investment Fund Managers Directive (“'''EU AIFMD'''”) applies, an “Article 36 custodian” means an entity appointed under Article 36(1)(a) of EU AIFMD to carry out the safekeeping of financial instruments that can be held in custody.}}


===[[Prime broker]] as depositary lite===
===[[Prime broker]] as depositary lite===
Line 37: Line 48:


WE SHALL SEE.
WE SHALL SEE.
By the way, the picture is of the Texas Book Depository, where there is a ''light'' on. Geddit??
Retrieved from "https://jollycontrarian.com/index.php?title=Special:MobileDiff/59248...59262"

Navigation menu