On 7 March 2014, the Central Bank published a Consultation Paper (CP 78) on carrying out depositary duties in accordance with Article 36 of the AIFMD whereby Member States may allow an authorised AIFM to market units of non-EU AIFs it manages to professional investors in their territory. This marketing is subject to a number of restrictions including a requirement that the AIFM ensure that one or more entities are appointed to carry out the duties referred to in Article 21(7) (monitoring of cash flows of the AIF), 21(8) (safe-keeping of the AIF assets) and Article 21(9) (oversight of AIFM operations).
Article 36 does not set out eligibility criteria for entities proposing to provide these duties. CP 78 looks at the position where a Fund Administrator proposes to both provide administration services and perform the depositary duties set out in Articles 21(7) and 21(9), for the same non-EU AIF. It considers what requirements should apply to manage conflicts of interest and proposes to include the following requirements in Chapter 5 – Fund Administrator Requirements - of the AIF Rulebook; CP 78 proposes that where a Fund Administrator provides both administration services and any of the services listed in Regulation 22(7) and/or 22(9) of the AIFM Regulations (depositary services) to the same non-EU AIF, it shall:
- functionally and hierarchically separate the depository services and the administration services by carrying out the depositary services through a separate subsidiary;
- require the individual responsible for managing the subsidiary to report directly to an individual at PCF level within the parent fund administrator; and
- advise the Central Bank of the reporting structure which it has put in place.
The consultation closes on 30 May 2014.