Depositary lite - AIFMD Provision: Difference between revisions

Depositary lite - AIFMD Provision (view source)

Revision as of 10:09, 20 May 2019

1,322 bytes added , 20 May 2019

no edit summary

Amwelladmin

Bureaucrats, Interface administrators, Administrators

82,903

edits

@@ Line 1: / Line 1: @@
 {{aifmdanat|36}}
-'''Cut-down depositary function''': Non-{{tag|EU}} [[AIF]]s marketed by an {{tag|EU}} [[AIFM]] to EU investors through [[private placement]] have to comply with everything else in {{tag|AIFMD}} but the depositary requirement is restricted to just cash monitoring, custody and handling subscriptions and redemptions.
+'''Cut-down depositary function''': Non-{{tag|EU}} [[AIF]]s marketed by an {{tag|EU}} [[AIFM]] to EU investors through [[private placement]] — call them {{aifmdprov|Non-EU AIF}}s — have to comply with everything else in {{tag|AIFMD}} ''but they don’t have to have a {{aifmdprov|depositary}}''.
-'''Liability''': Unlike in a full-blown depositary, under article {{aifmdprov|21}} there is no strict liability for loss of assets for a {{aifmdprov|non-EU AIF}}, and no requirement to appoint a single {{aifmdprov|depositary}} - therefore this regime is referred to as “{{aifmdprov|Depositary-Lite}}” or “{{aifmdprov|Depo-Lite}}”.
+But {{aifmdprov|Non-EU AIF}}s ''do'' have to have someone to monitor cash flows, look after [[custody]] assets and manage [[subscription|subscriptions]] and [[redemption|redemptions]] of fund units, functions which are carried out by a {{aifmdprov|depositary}} in a full-blown [[AIF]]. 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.
-===Prime Broker as depositary lite===
+'''Liability''': Unlike in a full-blown {{aifmdprov|depositary}}, a depo-lite does ''not'' have strict liability for loss of a {{aifmdprov|Non-EU AIF}}’s  assets.
-An AIFM can appoint the [[prime broker]] as its custodian for a non-EU AIF, but the PB will not want to assume all liability, so will accept this the role subject to 28(1)(a) ''as it applies to a person carrying out the safe-keeping function under ({{aifmdprov|36(1)(a)}}).
+For all these reasons this regime for  {{aifmdprov|Non-EU AIF}}s is referred to as “{{aifmdprov|Depositary-Lite}}” or “{{aifmdprov|Depo-Lite}}” regime.
+===[[Prime broker]] as depositary lite===
+A [[prime broker]] will be keen to act as custodian for a {{aifmd|Non-EU AIF}}, where it can get its grubby hands on all those lovely [[Rehypothecation|rehypothecatable]] [[custody asset|custody assets]], but it will ''not'' want to assume all liability — since it isn’t required to — so will accept this the role of custodian under {{aifmdprov|28(1)(a)}} ''as it applies to a person carrying out the safe-keeping function under Art. {{aifmdprov|36(1)(a)}}''.
 Tedious, isn’t it.
+In any case where the [[PB]] is a depo-lite [[custodian]]:
+*There is no need for the usual delegation agreement transferring responsibility and liability from the {{aifmd|depositary}} to the prime broker, because there isn’t a {{aifmd|depositary}} - the {{aifmd|AIF}} appoints [[PB]] directly to carry out the safe keeping;
+*The PB won't want to sign an equivalent acceptance of all responsibility and liability directly to the {{aifmd|AIF}} because it isn't obliged to, and why would you?
 ===Does a margin-holder who receives collateral under a pledge count as a delegated custodian?===
-It is one thing for a prime broker, who definitely is safe-keeping for its client, to accept responsbilities as a depositary’s delegate (or a depo-lite), but what about a futures clearer or a swap counterparty who receives margin under a pledge? It is hard to see why they would avoid the general drafting under AIFMD, but there are plenty of reasons it doesn’t make any sense. for one thing, a title transfer collateral arrangement, which is economically the same thing, wouldn’t be caught. Practically that may be the answer: just don’t take collateral under a pledge — or don't take non-cash collateral at all — but in the [[Regulatory IM]] regime that might be difficult, right? WE SHALL SEE.
+It is one thing for a [[prime broker]], who definitely ''is'' safe-keeping for its client, to accept responsibilities as a {{aifmd|depositary}}’s delegate (or, per the above, on a more  limited  basis as a [[depo-lite]]), but what about a [[futures]] [[clearing broker]] or a [[Counterparty|swap counterparty]] who receives [[margin]] under a [[pledge]]? It is hard to see why they would avoid the general drafting under [[AIFMD]], but there are plenty of reasons it doesn’t make any sense. For one thing, a [[title transfer collateral arrangement]], which is economically the same thing, wouldn’t be caught. Practically that may be the answer: ''just don’t take [[collateral]] under a [[pledge]]'' — or don't take [[non-cash collateral]] at all — but under the forthcoming [[Regulatory IM]] regime that might be difficult, right?
+WE SHALL SEE.