The IFIA has published a new guidance paper entitled IFIA Guidance Paper 3A: AIFMD Depositary Duties. The new guidance, which supplements the IFIA’s existing guidance on trustee duties, addresses the new obligations imposed on depositaries under AIFMD.
The first part of the paper addresses the new cash monitoring obligations of the depositary as set out in the Level 2 Delegated Regulation supplementing AIFMD and the Irish Regulations implementing AIFMD. The paper sets out each of the specific regulatory requirements and provides a commentary on how a depositary might achieve compliance with each requirement. In summary, depositaries will be required, amongst other things, to:
- Carry out periodic reviews of the operation of the AIF’s cash accounts
- Determine that all such accounts are opened with eligible entities and maintained in an acceptable name (either that of the AIF, the AIFM acting on behalf of the AIF or the depositary acting on behalf of the AIF)
- Put in place appropriate procedures to reconcile cash flow movements
- Periodically review the transfer agents policies and procedures in relation to reconciliations and the escalation and treatment of all aged and/or unreconciled items
The second part of the paper deals in turn with the five oversight duties of depositaries under AIFMD. In discharging these duties, the depositary will be required to carry out ex-post controls and verifications of processes and procedures performed by the AIFM or its delegates. The paper sets out a number of suggested practices which the depositary might undertake in this context, including:
- Assessing the nature, scale and complexity of the AIF in developing its oversight plan
- Carrying out annual onsite inspections of the AIFM and/or its delegates
- Performing sample walk-through testing
- Reviewing the performance of the administrator against key performance indicators
- Initial and on-going assessment of the AIFM’s processes and control environment
Contributed by James Phelan
