AIMA: Managers must check administrator’s termination policy

Fund managers and administrators should be clear on what happens if the relationship ends before signing contracts.

Private fund managers should ensure an administrator’s termination policy is clear and comprehensive before its appointment, according to the Alternative Investment Management Association.

In its updated guidance on choosing a fund administrator, the industry body said a service provider should be able to demonstrate that it will collaborate with the fund manager to ensure all legal agreements were terminated, and the relevant regulatory bodies are informed of the end of the agreement.

“Where the client is moving the service to another administrator, a full transition plan should be put in place to help project manage and co-ordinate the transition with the new administrator,” the guidance said.

Arrangements would include transferring of cash and assets, agreement regarding communication to investors and other third parties, agreement on the transfer of records to the new administrator, and a potential transition audit so financial statements can be produced for the period leading to the transition date.

“Responsibility for discharging the costs of the above activities should be agreed at the outset,” AIMA said.

The scope and nature of the administrator’s core and ancillary services, how the administrator would expect to interact with the managers and its ability to work with other providers such as the depository and prime broker should also be examined, according to the guidance.

The guide was previously published in 2009 and has been revised to reflect changes to standards for cybersecurity, record-keeping and anti-money laundering checks, and of changed relationships resulting from the Alternative Investment Fund Managers Directive and the Dodd-Frank Act.