83,357
edits
Delegation of depositary’s functions - AIFMD Provision: Difference between revisions
Jump to navigation
Jump to search
Delegation of depositary’s functions - AIFMD Provision (view source)
Revision as of 09:32, 2 March 2022
, 2 March 2022no edit summary
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
| Line 1: | Line 1: | ||
{{aifmdanat|21(11)|}}{{aifmddepositarydelegation}} | {{aifmdanat|21(11)|}} | ||
===Overview=== | |||
On what on earth this is all about. | |||
[[AIFMD]], requires an [[AIF]] to appoint a [[depositary - AIFMD Provision|depositary]] to perform certain administrative functions: managing cashflows, supervising subscriptions and redemptions, and [[custody]] of the AIF’s assets labelled “safekeeping” in the argot of European Regulation. The depositary cannot have any financial transactions or other conflicts of interest with the fund and must be organised in the fund’s home jurisdiction. Therefore a prime broker cannot be an AIF depositary: it is (usually) not incorporated in the right jurisdiction, and in any case is definitely involved in financial transactions with the AIF. That’s what it is there fore. | |||
Now a big part of a prime broker’s business is [[margin lending]], which involves custody and reuse of the AIF’s assets. What to do? Well, AIFMD allows a depositary to delegate its custody safekeeping function (but only that function) to a third party where there are [[objective reason]]s for it doing so. | |||
It has (i) a limited ability to delegate that responsibility to a third party and (ii) an even more limited ability to discharge its liability for that responsibility to a third party. | |||
The risk to the depositary is: | |||
- That its delegation of the custody function is not permitted; or that | |||
- that it is permitted to delegate the custody function, but that having done so, it is held responsible under AIFMD for the loss of assets by its delegate, for some reason (ie that any the purported discharge of liability is invalid) | |||
Therefore what the depositary needs to achieve is | |||
- Establishing valid “objective reason” for delegating the custody function to UBS as prime broker. This we think is tried and true and not controversial: AIF depositaries delegate safekeeping to PBs all the time. | |||
- To the extent allowed by AIFMD, discharging its personal liability to the AIF for the loss of assets held by its delegate custodian by transferring that liability directyly to that delegate custodian | |||
{{aifmddepositarydelegation}} | |||
{{Ucits delegaton versus aifmd delegation}} | {{Ucits delegaton versus aifmd delegation}} | ||
{{sa}} | {{sa}} | ||