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Safekeeping duties with regard to assets held in custody - AIFMD Provision: Difference between revisions
Safekeeping duties with regard to assets held in custody - AIFMD Provision (view source)
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{{aifmdanat|DR89}} | {{aifmdanat|DR89}} | ||
*Breaking - this is due to be replaced in 2020 with the upshot of [https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018R1618&from=EN Commission Delegated Regulation (EU) 2018/1618 amending Delegated Regulation (EU) 231/2013] | |||
Note the lookthrough provisions of Article {{aifmdprov|DR89(3)}}. If an {{aifmdprov|AIF}} is set up as a feeder into another fund controlled by the {{aifmdprov|AIFM}}, such that the primary investments of the {{aifmdprov|AIF}} are held in a different legal entity, the {{aifmdprov|Depositary}}’s safe keeping obligations apply to the assets held in that ultimate legal entity. In otherwords, an {{aifmdprov|AIF}} can't craftily get around AIFMD {{aifmdprov|Depositary}} safekeeping responsibilities by sticking its investment portfolio in a ten dollar offshore [[espievie]]. | Note the lookthrough provisions of Article {{aifmdprov|DR89(3)}}. If an {{aifmdprov|AIF}} is set up as a feeder into another fund controlled by the {{aifmdprov|AIFM}}, such that the primary investments of the {{aifmdprov|AIF}} are held in a different legal entity, the {{aifmdprov|Depositary}}’s safe keeping obligations apply to the assets held in that ultimate legal entity. In otherwords, an {{aifmdprov|AIF}} can't craftily get around AIFMD {{aifmdprov|Depositary}} safekeeping responsibilities by sticking its investment portfolio in a ten dollar offshore [[espievie]]. | ||
This stands to reason, but it can lead to complexity: If the AIF feeds into a fund alongside other offshore feeders that aren’t AIFMD regulated then the {{aifmdprov|depositary}}’s obligations, strictly speaking, apply to the extent of any assets in the master fund attributable to the AIF. Of course, if they’re held, as you would expect them to be, in a single account in the master, that's not really practicable, but no Depositary will want to be liable for assets it doesn’t have to be responsible for, so expect efforts to run segregated accounts inside the master fund. daily rebalancing of the segregated portfolios will become quite a trick, for no good reason. | This stands to reason, but it can lead to complexity: If the AIF feeds into a fund alongside other offshore feeders that aren’t AIFMD regulated then the {{aifmdprov|depositary}}’s obligations, strictly speaking, apply to the extent of any assets in the master fund attributable to the AIF. Of course, if they’re held, as you would expect them to be, in a single account in the master, that's not really practicable, but no Depositary will want to be liable for assets it doesn’t have to be responsible for, so expect efforts to run segregated accounts inside the master fund. daily rebalancing of the segregated portfolios will become quite a trick, for no good reason. | ||
Note: the obligations that apply are not the actual safekeeping ones of {{aifmdprov|21(8)}} — that unregulated fund may well have its own custodian, and may accept subscriptions from non-AIF feeders and other investors who do not require it to have a depositary — but of responsibility under the Delegated Regulation. So you have to accept responsibility for whichever schmuck the master fund appointed, and keep it honest. | |||
{{sa}} | |||
*{{tag|AIFMD}} Art. {{aifmdprov|21(8)}} — Depositary’s safe-keeping function | |||
*Delegation of safekeeping function under Art. {{aifmdprov|21(11)}} | |||