ESMA issue Consultation Paper on Asset Segregation

The European Securities and Markets Authority (ESMA) has recently published a consultation paper on the asset segregation requirements under the Alternative Investment Fund Managers Directive (AIFMD). Through the consultation, ESMA is soliciting feedback with respect to two possible diametrically opposed options on the asset segregation requirements in case of delegation of safe-keeping duties by the appointed depositary of an Alternative Investment Fund (AIF).

Option 1 – Super Omnibus Account

A delegated third party holding assets for the clients of multiple delegating depositaries would not be required to have separate accounts for each of the delegating depositaries. The AIF assets of all the said depositaries could be held in one account at the delegated third party level.

Option 2 – Segregated Accounts

The account in which the assets are to be kept by the delegated third party may only comprise assets of the AIF and assets of other AIFs of the same delegating depositary. Assets of AIFs of other depositary clients would have to be kept in separate accounts. Thus, for example, if a prime broker was a sub-custodian and holding AIF assets on behalf of five depositary banks, it would be required to open five segregated accounts.

Following the consultation which will run until the 30th January 2015, ESMA aims at publishing a final report on the guidelines in the second quarter of 2015. Kindly forward any queries regarding this consultation paper or to seek advice in connection with any of these activities here.

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