ESMA has published the responses it received in response to its consultation paper on guidelines on asset segregation under the AIFMD. The consultation paper set out ESMA’s proposals regarding the asset segregation requirements in case of delegation of safe-keeping duties by the appointed depositary of an alternative investment fund.
ESMA presented 5 options listed below but favoured options 1 and 2.
There were 31 responses from industry bodies across Europe, major custody and banking groups, asset management firms and depositaries. The vast majority of respondents rejected the ESMA preferred proposals under Option 1 and Option 2 and preferred Option 4, which represents the status quo. Respondents argued that Options 1 and 2 would not provide a greater level of investor protection but simply significantly increase operational complexity, risk and cost.
To read INDOS Financial’s original commentary on the proposals click here.
The Consultation Paper and the responses can be read here.
Asset Segregation Options presented in the ESMA Consultation Paper.
Option 1 | AIF and non-AIF assets should not be mixed in the same account and there should be separate accounts for AIF assets of each depositary when a delegate is holding assets for multiple depositary clients. |
Option 2 | The separation of AIF and non-AIF assets should be required, but it would be possible to combine AIF assets of multiple depositaries into a single account at sub-custodian level. |
Option 3 | AIF and non-AIF assets could be commingled in the account on which the AIF’s assets are to be kept at the level of the delegate. However, the delegate could not commingle in this account assets coming from different depositaries. |
Option 4 | AIF and non-AIF assets could be commingled in the account on which the AIF’s assets are to be kept at the level of the delegate. |
Option 5 | Complete segregation. |
