ESMA updates Q&As for AIFMD and UCITS Directive
Published: 02 August 2022
The European Securities and Markets Authority (ESMA) has published an updated version of its Q&A on the Application of the UCITS Directive and its Q&A on the application of the AIFMD including two new questions on depositaries and one new question on delegation. The issues (and responses) dealt with are the same in respect of both the AIFMD and UCITS but can be found in different sections of the relevant Q&A documents (Section VI and VIII in the AIFMD Q&As, Section X and XIII for UCITS Q&As).
The first question seeks clarification on reconciliation frequency between the depositary’s internal accounts and records and those of any third party to whom safekeeping has been delegated and what this means for an AIF or UCITS with a weekly dealing frequency which trades on a daily basis.
ESMA clarifies that reconciliation frequency depends not only on the dealing frequency of the relevant AIF or UCITS, but also on any trade which occurs even outside the dealing frequency. If an AIF or UCITS with a weekly dealing frequency trades on a daily basis, daily reconciliations are required.
The second question asks what the required reconciliation frequency means in the case of a tri-party collateral manager which is not the depositary.
- that in this case the tri-party collateral manager is appointed by the asset manager and also needs to be the delegate of the depositary;
- the triparty collateral manager is required to transmit the end-of-day positions on a fund-by-fund basis or, if applicable, on a compartment-by-compartment basis. The information provided allows the depositary to record the end-of-day positions and allows it to comply with the provisions; and
- the information provided allows the depositary (for both UCITS and AIFMD) to verify that the quantity of the identified financial instruments recorded in the financial instruments accounts opened in its books matches the quantity of the identified financial instruments held in custody by the third party.
Where marketing is performed by a third party distributor under a contractual relationship with an AIFM or UCITS ManCo, is the AIFM / UCITS ManCo still responsible for ensuring that marketing communications comply with the requirements under Article 4(1) of the Cross Border Distribution of Funds (CBDF) Regulation? And what is the position if there is no contractual relationship with a third party distributor?
- that marketing is one of the functions included in the management of funds, and therefore subject to UCITS (Article 13) and AIFMD (Article 20);
- that the CBDF Regulation seeks to establish uniform rules on the publication of national provisions concerning marketing requirements for collective investment undertakings and on marketing communications addressed to investors; and
- that fund managers are responsible for compliance with CBDF Rules (Article 4), irrespective of who is the actual entity marketing the fund, and of the relationship it has with the third party distributor (whether it is contractual or not).
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