On 1 December 2014, ESMA published a consultation paper setting out its proposed guidelines in respect of the asset segregation requirements under AIFMD applicable to a third party to whom safe-keeping duties have been delegated by a depositary (the “Consultation Paper”).
By way of background, pursuant to Article 21(11) of AIFMD, a depositary has the power to delegate its safe-keeping functions to third parties, subject to certain conditions. One such condition is that the third party must segregate the assets of the depositary’s clients from (i) its own assets and (ii) the assets of the depositary, in such a way so that the assets can at any time be clearly identified as belonging to clients of a particular depositary.
Article 99(1)(a) of Commission Delegated Regulation (EU) No. 694/2014 (“Level 2”) further states that where the safe-keeping function has been delegated by a depositary to a third party pursuant to Article 21(11) of AIFMD, the depositary must ensure that the third party is able, at any time and without delay, to distinguish the assets of the depositary’s AIF clients from (i) the third party’s own assets, (ii) the assets of the third party’s other clients, (iii) the assets held by the depositary for its own account and (iv) the assets belonging to clients of the depositary that are not AIFs.
Therefore, a delegated third party is permitted to maintain an account that can comprise not only the assets of the AIF for which the safe-keeping function has been delegated, but also assets of other AIFs.
This is confirmed by recital 40 of AIFMD which provides that a third party to whom the safe-keeping of assets is delegated should be able to maintain a common segregated account for multiple AIFs, a so- called ’omnibus account’.
The Consultation Paper considers whether such an omnibus account is capable of holding assets for AIF clients in respect of different delegating depositaries or whether such account may only comprise AIF assets in respect of the same delegating depositary. It is in this context that ESMA is seeking feedback from industry in respect of two possible options:
- The account for which the AIF’s assets are to be kept by the delegated third party may only comprise assets of the AIF and assets of other AIFs of the same delegating depositary. Assets of AIFs of other depositaries would be considered to be assets of the third party’s “other clients” for the purpose of Article 99(1)(a) of Level 2; or
- A delegated third party holding assets for multiple depositary clients would not be required to have separate accounts for the AIF assets of each of the delegating depositaries.
While the proposed guidelines will be of direct relevance to depositaries (and their delegates, in particular, prime brokers), it is worth noting that ESMA is taking into account that the AIFM is ultimately responsible for compliance with AIFMD requirements and therefore considers it appropriate to apply the proposed guidelines to AIFMs as well as depositaries and competent authorities.
The deadline for responses to the Consultation Paper is 30 January 2015. It is anticipated that ESMA will finalise its guidelines and publish a final report regarding this matter in the second quarter of 2015.
A copy of the Consultation Paper can be found at the following link: