Directive

As regards the CSDs (central securities depositaries) and depositary banks, where are the risks for the depositaries in assuming strict liability for the restitution of assets of their underlying fund clients in the case of lost assets at a CSD? How likely is this to even happen?

The AIFMD (alternative Investment Fund Managers Directive) deadline came and went on 22 July 2014. This was the expiration of the grandfathering period, the point at which all managers of alternative investment vehicles had to be compliant with the Directive and all that it entails, notably the appointment of a single depositary bank for each fund under management falling within the purview of the Directive, to take care of cash flow monitoring, safekeeping of assets and oversight duties.

Private equity managers ensnared by AIFMD ( the Alternative Investment Fund Managers Directive) have been urged to start making preparations to appoint a depositary, or depositary-lite, now, despite the grandfathering period that applies to them not ending until 2015.

Private equity firms which are not fundraising or are managing close-ended funds that existed prior to 22 July 2013, and have not made additional investments after that date are exempted from some of the provisions of AIFMD including the obligation to appoint a depositary until 2015.

With the advent of CSDR (Central Securities Depository Regulation) and Target2 Securities (T2S) arriving in Wave 1 on 22 June 2015, one fundamental change is occurring in the European settlement cycle this October with the switch from a general T+3 settlement cycle to settlement on T+2. This means that trades that are to be settled in Europe will have one less day to settle than they did previously.

The Council of the European Union formally adopted the proposals for the fifth version of the undertakings for collective investment in transferable securities (UCITS V) on 23 July, one day after the arrival of the Alternative Investment Fund Managers Directive (AIFMD). Given that the changes within UCITS V are at least in part aimed at further aligning the Directive with AIFMD, the timing was apt.

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