On 4 June 2019, ESMA published updated questions and answers on the application of the Alternative Investment Fund Managers Directive (" AIFMD") and the Undertakings for the Collective Investment in Transferable Securities (" UCITS") Directive.
These questions and answers relate to delegation issues for depositaries (including delegation to another legal entity within the same group) and to depositary's activities conducted by branches. In this context and in essence, ESMA provides that:
- Supporting tasks linked to depositary functions may relate to cash monitoring and oversight and avoid the strict conditions imposed by the delegation regime of the AIFMD or the UCITS Directive provided that (i) these supporting tasks are standardised and pre-defined, (ii) their execution does not involve any discretionary judgement or interpretation by the third party in relation to the depositary functions, and (iii) their execution does not require specific expertise in regard to the depositary functions.
- An arrangement whereby a depositary entrusts tasks to a third party and gives this third party the ability to transfer assets belonging to a UCITS or to an AIF managed by an authorised AIFM without requiring the depositary's intervention is allowed, but is subject to the strict conditions of the delegation regime of the AIFMD or the UCITS Directive.
- A depositary which is a branch located in a Member State (i.e. that of the UCITS or the AIF managed by an authorised AIFM for which this branch is acting as depositary) other than the home Member State of its head office:
(i) may allocate certain of its functions to its head office, but must have an operational infrastructure and an internal governance system which are adequate to carry out its depositary functions autonomously from its head office and ensure compliance with national rules implementing the AIFMD or the UCITS Directive, and
(ii) may be subject to local supervision and authorisation for performing its depositaries activities.
- For the purposes of the delegation regime of the AIFMD or the UCITS Directive, a legal entity belonging to the same group as that of a depositary to which this depositary delegates certain of its functions should be considered by this depositary as a "third party".
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.