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Documentation of rationale for Board composition

On 5 October 2015, the Central Bank of Ireland published a 16th edition of its AIFMD Q&A.  In its Feedback Statement to CP 86 Consultation on Fund Management Company Effectives – Delegate Oversight, the Central Bank indicated that it would amend its authorisation process for fund management companies to require that the rationale for Board composition must be included in the company’s programme of operations (POA).  In its response to new Question ID 1098, the Central Bank has confirmed that although only newly authorised AIFMs are subject to the authorisation process which requires the rationale for the Board composition to be documented in the POA, it is good practice for the director performing the organisational effectiveness role for each authorised AIFM (whether new or existing) to document the rationale for the Board composition as part of developing this role and to include this in the POA when it is next updated. 

However, the Feedback Statement also indicated that POAs do not have to be updated to reflect changes in managerial functions and identification of the independent director who will undertake the organisational effectiveness role until 30 June 2016 at latest.  It seems to us therefore that any POAs which are updated before the organisational effectiveness role is put in place do not need to include the rationale for Board composition. 

CSD compliance with delegation provisions

On 1 October 2015, ESMA updated its AIFMD Q&A by providing that when assets of an AIF held in custody are provided by a depositary to an EU central securities depositary (CSD) or third country CSD, the CSD itself  must comply with the provisions on delegation set out under Article 21(11).

Third-country passport

On 13 October 2015, Steven Maijoor, the Chair of ESMA, appeared before a scrutiny session of the Economic and Monetary Affairs Committee of the European Parliament regarding the application of the AIFMD passport.  He confirmed that ESMA will continue its assessment of Hong Kong, Singapore and the US with a view to reaching a definitive conclusion on whether to extend the passport to those countries. ESMA will also start to access a second group of non-EU countries namely Australia, Canada, Japan, the Cayman Islands and Bermuda.  In July, ESMA indicated that no obstacles existed to the extension of the passport to Guernsey and Jersey and noted that Switzerland would remove any remaining obstacles to the extension of the passport with the enactment of legislation.  ESMA intends to continue this work until it has provided advice on all the non-EU domiciles that it considers relevant for the purposes of the extension of the AIFMD passport.  

Contributed by Patricia Taylor.