Home / CY AIF Law of 2018 / PART ΙΙ: PROVISIONS REGARDING THE ALTERNATIVE INVESTMENT FUNDS / Chapter 3: Common provisions regarding the organisation and operation of AIFs / [17] Conflicts of interest.
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17.Conflicts of interest.
(1) Without prejudice to the provisions of article 15 of the Alternative Investment Fund Managers Law, applicable to AIFMs which are internally managed AIFs, this article shall apply to internally managed AIFs, unless otherwise provided in this Law.
(2) An internally managed AIF shall take all reasonable steps to identify conflicts of interest that arise in the course of AIF management-
(a) between the internally managed AIF, including the persons who effectively direct its business, its employees or any person linked, directly or indirectly, by close links to the internally managed AIF by control, and the investors of the AIF∙ or
(b) between the internally managed AIF and any person engaged in AIF activity or linked, directly or indirectly, by close links to the internally managed AIF.
(3) The internally managed AIF shall-
(a) establish, maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps designed to identify, prevent, manage and monitor conflicts of interest in order to prevent them from adversely affecting the interests of the AIF and its investors∙
(b) segregate, within its own operating environment, tasks and responsibilities which may be regarded as incompatible with each other or which may potentially generate systematic conflicts of interest∙ and
(c) assess whether its operating conditions may involve any other material conflicts of interest and disclose them to the investors of the AIF.
(4) Where organisational and internal administrative arrangements of paragraph (a) of section (3) are not sufficient to ensure, with reasonable confidence, that risks of damage to investors interests will be prevented, the internally managed AIF shall clearly disclose the general nature or sources of conflicts of interest to the investors before undertaking business on their behalf, and develop appropriate policies and procedures to overcome those conflicts of interests.
(5)(a) Where the internally managed AIF uses the services of a prime broker, the terms shall be set out in a written contract, which -
defines the terms of their cooperation∙
(provides for any possible transfer and reuse of AIF’s assets and that any such transfer or reuse shall comply with the AIF fund rules or instruments of incorporation∙ and
provides that the depositary shall be informed of the contract.
(b) The internally managed AIF shall exercise due skill, care and diligence in the selection and appointment of prime brokers with whom a contract referred to in paragraph (a) is to be concluded.
(6) The Securities and Exchange Commission may, by means of a directive, specify any detail or technical matter regarding the application of this article.
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