09 Nov EU Investment Funds Updates
Revised depositary safekeeping duties under AIFMD and the UCITS Directive
The European Union’s Delegated Regulation 2018/1619, amending Delegated Regulation (EU) 2016/438 regarding safe-keeping duties of depositaries (Delegated Regulation), was published in the Official Journal of the European Union.
The Delegated Regulation supplements the Undertakings for the Collective Investment in Transferable Securities Directive (UCITS Directive) and the Alternative Investment Fund Managers Directive (AIFMD). Fund depositaries’ duties regarding the safekeeping of clients’ assets are set out in the UCITS and AIFM Directives but are further detailed in the amended Delegated Regulation. Additionally, the UCITS and AIMF Directives requires that where a depositary delegates safekeeping functions to third parties, namely custodians, the assets also need to be segregated at the level of the delegate. The manner in which this requirement is fulfilled is now detailed in the amended Delegated Regulation.
The following delegated regulations will enter into force on 19 November 2018 and will apply from 1 April 2020. The regulations set out detailed UCITS and AIFMD requirements where custody is delegated to a third party (a sub-custodian).
- Delegated Regulation 2018/1618 amending Delegated Regulation (EU) 231/2013 as regards safe-keeping duties of depositaries under AIFMD (read text here)
- Delegated Regulation 2018/1619 amending Delegated Regulation (EU) 2016/438 as regards safe-keeping duties of depositaries under UCITS (read text here)
These regulations introduce additional clarity (by amending existing regulations) in respect of:
- asset segregation
- record keeping
- reconciliations (including frequency of reconciliations)
- contractual requirements (including mandatory provisions)
- specific requirements (concerning insolvency) where custody is delegated to a third party in a third country
ESMA AIFMD Q&A – AIFMs managing EU umbrella AIFs on a cross-border basis – notifications
ESMA updated its AIFMD Q&A on 4 October 2018 with a new Q&A. The Q&A clarifies that where an AIFM intends to manage an EU umbrella AIF on a cross-border basis by way of the AIF management passport, the AIFM must identify the umbrella AIF, as well as the name and investment strategy of its sub-funds, to facilitate administrative procedure in home and host Member States. Any change in the composition of an umbrella AIF that is managed on a cross-border basis has to be notified to the competent authorities under Article 33(6) of AIFMD.
Cross-border distribution of collective investment funds
The European Parliament’s Economic and Monetary Affairs Committee (ECON) published a draft report on the proposal for a Directive on the cross-border distribution of collective investment funds. The European Commission adopted the proposed Directive, together with the proposed Regulation on facilitating cross-border distribution of collective investment funds, in March 2018.
ESMA Q&AS on the Benchmarks Regulation
ESMA updated its Questions and Answers (Q&As) on the Benchmarks Regulation (BMR) on 27 September 2018.
The updated BMR Q&As provide new clarifications on the following topics:
- the written plan to be produced by users of benchmarks
- the reference to systematic internaliser in the definition of financial instruments
- when banks issuing certificates classify as users of benchmarks
- why NAV of investment funds should be considered input data and not benchmarks
- the application for endorsement of a family of benchmarks
- the language of benchmark statements
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