CP12/32: Implementation of the Alternative ... - BVCA admin

November 2012
CP12/32
Implementation of the Alternative Investment Fund Managers Directive
many areas where questions about the costs and benefits of policy options might
otherwise have determined our course of action. Many respondents to DP12/1 voiced
concerns about the costs of appointing a depositary where none currently exists 110 ,
but we cannot alleviate costs that are a consequence of the Directive’s investor
protection measures.
9.11 We are, however, mindful of these concerns, especially in terms of allowing a competitive
market to emerge for the provision of depositary services in the UK. Currently only a small
number of firms carry on the regulated activity of acting as trustee/depositary of authorised
funds. 111 These are specialised roles, and while there is no reason in principle why the firms
performing them should not extend their activities to a wider range of AIFs, there is equally
no reason why other firms should not enter the market to meet the needs of AIFs that have
not previously used a depositary.
9.12 The Directive allows any UK firm authorised as a credit institution, and certain types of
MiFID firm, to act as depositary for any type of AIF. It also allows other firms that were
permitted under national law (as of July 2011) to be depositaries of UCITS, to act as AIF
depositaries as well. We interpret this to mean that only firms that were actually authorised
as depositaries at the relevant date are eligible under this category, so no new firms can be
added to it.
9.13 The Directive does not specify any process for the authorisation of depositaries or apply
additional capital requirements in relation to them. However, since acting as a depositary of
an AIF will be a specified activity under the Regulated Activities Order as explained in
Chapter 4, any firm wishing to carry it out will need to apply to the FCA for the relevant
Part IV permission unless there is an exemption in place under FSMA.
9.14 In DP12/1 we noted that a firm currently acting as trustee or depositary of an authorised
fund requires minimum fixed capital of £4m. 112 We asked whether this amount should be
increased, and whether a different basis of calculation should be used. 113 There were mixed
views – some respondents agreed that an increase was justified, if only to reflect inflation
since the figure was originally set, but others argued that an own-funds requirement can
never be sufficient to offset the potential liability where assets are lost, so other measures
would be more appropriate.
9.15 We have decided not to make any changes to this rule for the time being, in light of the
UCITS V proposals that aim to restrict the types of entity that can act as a depositary and
to impose a higher standard of liability on them. We think it would be better to wait for
the outcome of negotiations on these proposals before reviewing the capital requirements
for depositaries of authorised funds, whether they are UCITS schemes or AIFs.
110 Question 38 of DP12/1.
111 Performing a similar function for an unregulated CIS is not a regulated activity in itself, although it may involve safeguarding and
administering investments, which is a regulated activity.
112 This refers to a firm that is not also a credit institution or a MiFID investment firm, as these latter types of firm would be subject to
the capital requirements in GENPRU and BIPRU.
113 Question 39 of DP12/1.
Financial Services Authority 71