The Alternative Investment Fund Managers Directive (AIFMD) was implemented to harmonise the regulatory framework around fund managers in the European Union. It was conceived to ensure that events such as the Madoff scandal never occur again. Bernie Madoff’s Ponzi scheme left thousands of investors out of pocket.
The implications of AIFMD, however, reach far beyond the fund level and has increased the liability of depositary banks. The duties of the depositary include monitoring of a fund’s cash flow, oversight of its functions and safekeeping of its assets. Any loss of assets that occur on the depositary’s watch, it is liable for.
Monitoring of its network of custodians, prime brokers, markets, CSDs (central securities depository) and transfer agents has, therefore, never been more important for depositaries. UCITS V further outlines the role of the depositary; its eligibility to act as a custodian, delegation of custody and further directives as to the monitoring and oversight of a fund’s cash flow.
Thomas Murray Data Services assists depositary banks in meeting the obligations facing them under AIFMD and UCITS V through our extensive monitoring service that covers markets and CSDs, global and sub-custodians, transfer agents and prime brokers.
New European Regulation - AIFMD and UCITS V
Thomas Murray Regulatory Monitoring
- Depositary BanksAssuming liability for restitution of client assets lost within its network. Big difference between AIFMD & UCITS V is that UCITS V includes liability at CSD level.
- Market & DepositoriesCrucial that depositaries demonstrate knowledge and due diligence of capital market infrastructures. Conditions here affect the manner in which client assets are held, transferred and secured.
- Global CustodiansEntrusted with safekeeping of assets, depositaries are liable for losses at global custodians under both AIFMD and UCITS V. Regular monitoring and due diligence is essential.
- Sub-CustodiansIn the network of global custodians, they hold assets in local markets. Global custodians need good oversight of these entities in foreign markets.
- Prime BrokersDepositaries are liable following on from the Lehman collapse. Prime brokers need to be carefully monitored since there is significant risk for depositaries in this area.
- Transfer AgentsMaintain accurate records on behalf of their clients including balances and transactions, issuance and cancellation of certificates and dealings with related issues. Important that depositaries are working with TAs they trust.
- Cash CorrespondentsDepositary and Custodian banks often have large networks of correspondent banks overseeing their accounts in foreign territories. Managing and monitoring these accounts is, also, often a challenge.
- Fund AdministratorsResponsible for duties including such aspects as NAV calculations, accounting and recording of share and unit issuance and redemption.
- Collateral AgentsHold collateral on behalf of lenders. Collateral is needed by funds in the form of securities for short selling and posting at FMIs. Increasing in importance in the new collateralised world.