Assets held by a depository under the Alternative Investment Fund Managers Directive would not be available to a creditor in the event of insolvency under new rules proposed by the European regulator.
In a recent opinion, the European Securities and Markets Authority recommended that where a depositary goes bankrupt, assets it holds in custody are not available for the depositaries creditors, putting the onus on the depositary to “take all necessary steps” to ensure this is the case.
The opinion also reiterates a depositary’s responsibility to register a financial instrument in its books before sub-delegating custody of them further down the depositary chain. ESMA plans to add a reference to the Alternative Investment Fund Manager’s Regulation to clarify this.
The regulator added that any delegates of depositaries should keep an AIF’s assets in a separate account to others.
The recommendation, which follows a market consultation, mirrors the retail-focused UCITS V Directive, which is a more recent regulation than the AIFMD.
The opinion was recommended to the European Parliament, the Council and the Commission for approval.