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How could AIFMD II change the way managers approach delegation?
AIFMD II is the long-awaited update to the Alternative Investment Fund Managers Directive (AIFMD). The AIFMD Review looked at a number of key areas, including delegation, and the marketing passport.
AIFMD II is the long-awaited update to the Alternative Investment Fund Managers Directive (AIFMD).
The AIFMD Review looked at a number of key areas, including delegation, and the marketing passport.
Delegation is a key area of focus for the AIFMD review. Currently, AIFMD permits fund managers to delegate investment management and/or depository functions to third parties, provided that they maintain overall responsibility for complying with AIFMD requirements.
There have been calls for this delegation arrangement to be reviewed in light of recent high profile cases where delegated oversight has not worked as intended.
In particular, it has been suggested that AIFMD II could include provisions requiring managers to exercise a higher degree of oversight over delegated functions, in line with the requirements set out by the CSSF and Central Bank of Ireland around monitoring and oversight.
AIFMs will need to provide additional information to national regulators on their delegation arrangements during the authorisation process including the extent of delegation and sub-delegation arrangements as well as detail on their personnel, systems, controls and procedures implemented to effectively monitor, supervise and control their delegates.
AIFMs should not delegate more portfolio or risk management functions than they retain and the arrangements will be reviewed every two years.
Sub-delegation to non-authorised entities will be prohibited, although further detail will be required to fully understand the scope and application of this rule. Some of the proposed changes to the delegation rules may require EU AIFMs to review and/or repaper their existing arrangements
These changes will have implications for fund managers and the way they operate. It is something that all managers will need to keep an eye on as AIFMD II progresses. Dasseti's digital platform is an effective and compliant delegate oversight solution, and is already being used in Ireland and Luxembourg for this purpose. Talk to the team about using Dasseti for maintaining oversight of your delegates.
AIFMD II is not the only game in town and AIFMD will continue to develop in parallel with other key EU financial services directives and regulations, including PRIIPs KID, UCITS V and MiFID II. All of these directives and regulations are designed to protect investors and promote good market practices, so it is important that fund managers keep up to date with all the latest developments.