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

November 2012
CP12/32
Implementation of the Alternative Investment Fund Managers Directive
Q15: What additional safeguards, if any, should there be to ensure
effective management of conflicts of interest, especially in
relation to custody of AIF assets?
Depositaries for non-EEA AIFs
9.41 We explained in DP12/1 that Article 36 imposes a limited depositary requirement on a UK
AIFM managing a non-EEA AIF that is to be marketed in the UK under national private
placement. 120 The AIFM must ensure that one or more firms carry out the essential
depositary functions of cash monitoring, safekeeping of assets and oversight, but the rest of
the depositary provisions (e.g. on independence, segregation and liability) do not apply.
9.42 We asked in DP12/1 what the appropriate regulatory treatment would be for a UK firm
that wished to offer these depositary services. 121 All respondents agreed that these firms
should be subject to some form of regulation, although views differed about whether it
should be the full AIF depositary regime or something equivalent to current regulation of
these functions. There were no suggestions about particular industry codes or principles of
best practice that might take the place of regulation.
9.43 One approach, which several respondents proposed, would be to require all such firms to
hold the Part IV permission of ‘acting as an AIF depositary’. This approach might be
burdensome for a firm that did not intend to provide all the prescribed functions, especially
since stand-alone functions, such as cash monitoring, are not regulated activities when
performed in any other context. However, we have had no clear indication so far that any
firms would be looking to provide stand-alone services of this kind, as opposed to making
them an add-on to a mainstream depositary service for UK AIFs.
9.44 On that basis, we propose to require all UK firms offering this type of depositary service to
be authorised as a full AIF depositary (FUND 3.11.30R) although only subject to the rules
on cash monitoring, safekeeping of assets and oversight. It would be open to those firms to
limit their activities to a particular type of AIF, such as ‘PE AIFs’, to benefit from the
specialised capital requirements we propose. We would be particularly keen to receive
responses from firms that may be interested in providing depositary services to non-EEA
AIFs, about whether this regime would be proportionate.
Q16: Do you agree with our approach requiring UK firms providing
depositary services under Article 36 to hold a Part IV
permission to be an AIF depositary?
120 Paragraphs 7.19 to 7.21 of DP12/1; Article 36(1)(a) AIFMD.
121 Question 46 of DP12/1.
Financial Services Authority 77