Since the adoption of the AIFMD, the European Securities and Markets Authority (“ESMA”) has produced a range of material relating to the application of the Alternative Investment Fund Managers Directive such as technical advice, guidelines, regulatory technical standards and Q&As. On 1 December 2014, ESMA published a consultation paper with proposed guidelines regarding asset segregation under the AIFMD.

The draft guidelines published by ESMA are most applicable to depositaries of alternative investment funds (“AIFs”) (and their delegates), however, they are also of relevance to alternative investment fund managers and other competent authorities. The depository provisions on asset segregation are a key provision of the AIFMD framework for improving investor protection. In order to ensure consistent application of the rules under the AIFMD and its implementation measures, ESMA is seeking feedback regarding the proposed guidelines from alternative investment funds, depositories and other relevant authorities.

ESMA has proposed two possible options that it has sought feedback on, after the feedback is considered, a report with finalised guidelines will be published in Q2 2015. The options are as follows:

Option 1: a delegated third party holding assets for multiple depositary clients would not be required to have separate accounts for the AIF assets of each of the delegating depositaries.

Option 2: the account on which the AIF’s 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.

To see a list of the proposed guidelines please follow this link to the full consultation paper and turn to Annex III.

Should you require any further advice or information on AIFMD, Cleveland & Co, your external in-house counsel, are here to help.