COO Connect interviews Simon Whiteside, Partner at Simmons & Simmons, on the AIFMD depositary lite regime. Simon discussed the risks to managers under AIFMD if depositary lite providers do not perform their duties and the impact of future developments such as the potential extension of the AIFMD pan-European marketing passport and the phasing-out of the private placement regimes in 2018. Click here to watch the video.

The interview highglights the importance of performing proper due diligence on depositary providers. INDOS Financial has prepared an AIFMD Depositary Due Diligence Assessment Checklist template to enable managers to assess and compare different service offerings and would be pleased to talk to any managers about the key risk areas to consider.

To listen to INDOS Financial’s own update on how the depositary regime is working out in practice, you can watch the video below.

Almost four months have passed since the end of the AIFMD transitional period on 22 July 2014. COO Connect talked to INDOS Financial’s Bill Prew about:

• how the AIFMD depositary requirements are working in practice;
• the demand for depositary services since 22 July;
• whether concerns in the run up to AIFMD about the costs of depositary services were justified;
• the level of awareness and interest being shown by fund investors in the role of the depositary; and
• expected future developments.

INDOS Financial’s Bill Prew will be part of an HFM Week panel discussion on the AIFMD Annex IV regulatory reporting requirements. With most UK alternative investment fund managers needing to file their first Annex IV report to the FCA by the end of January 2015, the event will be a good opportunity to hear the thoughts of a number of experts on how managers can approach the exercise and different options available to them.

The event is taking place at the Four Seasons Hotel on 20 November 2014 from 8:30 to 10:15 and is open to all HFM Week subscribers. Click here to register.

At present only EU alternative investment fund managers (AIFMs) of EU alternative investment funds (AIFs) are able to take advantage of the pan-European marketing passport introduced by the Alternative Investment Fund Managers Directive (AIFMD). Non-EU AIFMs and managers of non-EEA AIFs are only to market funds in Europe through national private placement regimes – country by country rules which govern the marketing of AIFs to professional investors.

AIFMD requires the European Securities Markets Association (ESMA) to issue an opinion to the European Commission by 22 July 2015 on the functioning of the passport for EU AIFMs and on the functioning of the national private placement regimes. It must also issue an opinion on the extension of the marketing passport to non-EU AIFMs and AIFs.

Within three months of receipt of positive advice and an opinion from ESMA, the Commission is required to adopt a delegated act specifying the date when the passport should be extended to non-EU AIFMs and AIFs and become applicable in all Member States.

In order to produce this opinion and positive advice, ESMA should be convinced that  “no significant obstacles regarding investor protection, market disruption, competition and the monitoring of systemic risk will impede the extension of the passport.

ESMA has issued a “Call for Evidence” in order to inform its review of the extension of the passport.

Many in the industry remain sceptical that the passport will be extended to non-EU AIFMs and AIFs and believe that ESMA or the Commission will find excuses to defer implementation. Some suggest because there has not yet been widespread use of the passport by EU AIFs since 22 July 2013 (the original introduction date of AIFMD), ESMA will have insufficient evidence or experience on which to issue a positive opinion and may simply request more time. 

We have also seen ‘gold plating’ of the Article 42 requirements for non-EU AIFMs to market into certain countries such as Germany, France and Denmark, resulting in managers needing to appoint AIFMD depositary providers to market their funds. This gold plating could suggest some core, influential EU countries will take some convincing to support the extension of the passport to non-EU managers and funds.

It is now over three months since the end of the AIFMD transitional period on 22 July 2014. INDOS has been providing an independent depositary-lite service to many clients since June this year and by the end of the year we will be acting for over 30 funds with in excess of $2bn AUM.

Several of our clients have shared their positive experience for the benefit of other firms that are considering their depositary-lite options. Click here to read the testimonials.

We are seeing enquiries about depositary-lite service from a variety of managers. If your firm falls into one of the categories below, or you would simply value an informal conversation about anything AIFMD related, please contact [email protected] or via +44 (0) 203 691 6327.

• Managers that are concerned about the limitations and risks of a reverse solicitation strategy.
• Managers planning for 2015 and considering marketing funds in the EU.
• Small AIFM that expect assets to grow and lead the manager to become a Full Scope AIFM.
• Managers that are not receiving the value or service expected from their selected depositary. 
• Non-EU managers seeking to market in Germany or Denmark and therefore need a depositary-lite solution.