AIFMD—the regulation, appointment and function of a depository
Produced in partnership with Macfarlanes LLP
AIFMD—the regulation, appointment and function of a depository

The following Financial Services guidance note Produced in partnership with Macfarlanes LLP provides comprehensive and up to date legal information covering:

  • AIFMD—the regulation, appointment and function of a depository
  • AIFMD and the regulation of depositories
  • Appointing a depositary
  • The functions and duties of a depository
  • Safekeeping of financial instruments
  • Safekeeping of all other assets
  • Cash monitoring
  • Oversight
  • Depositories and avoiding conflicts of interest
  • Liability of a depository
  • more

AIFMD and the regulation of depositories

The purpose of the depositary is to act as a legally separate organisation, responsible for holding the formal documents that show who owns shares, bonds or any other assets. The rules concerning the appointment, approval and removal of a depository can be found in regulations 26 and 27 of the Alternative Investment Fund Managers Regulations 2013 (AIFM Regulations) and Chapter 3.11 (Depositories) of the Financial Conduct Authority (FCA ) Sourcebook on Investment Funds (FUND). The AIFM Regulations and FUND apply to a depository of a UK Alternative Investment Fund (AIF) managed by a full-scope UK Alternative Investment Fund Manager (AIFM) or an European Economic Area (EEA) AIFM.

To see the most recent updates on AIFMD, see Financial Services interactive AIFMD timeline.

The European Parliament’s glossary for the Alternative Investment Fund Managers Directive (Directive 2011/61/EU) (AIFMD) explains that a depositary typically has the following three core functions:

  1. the safekeeping of the assets of an AIF

  2. the day-to-day administration of the assets of an AIF, and

  3. the control of an AIF’s operation (compliance with investment policies and receipt of funds from, and payment of funds to, investors)

Part 4 of the AIFM Regulations details the operating conditions for full-scope AIFMs and depositories, specifically the liabilities that accrue when acting as a depository. AIFMs, and depositories, should be aware