Home / CY AIF Law of 2018 / PART ΙΙ: PROVISIONS REGARDING THE ALTERNATIVE INVESTMENT FUNDS / Chapter 5: AIF external manager / [24] Organisation and operations of the external manager.

24. Organisation and operations of the external manager.

(1) The entity undertaking the duty of the external manager of an AIF in accordance with article 6(2)(b), shall apply, as the case may be, in relation to its organizational and operational requirements and, more specifically, in relation to its initial capital requirements, own funds requirements, the authorisation requirements, the procedures for the withdrawal and suspension of its authorisation, the requirement for submission of data to the Securities and Exchange Commission, the liability it has for the performance of its duties and the delegation of such duties to a third person, the provisions of -

(a) the Alternative Investment Fund Managers Law or the relevant law of a member state transposing Directive 2011/61/EU, if it is an AIFM,

(b) the Open Ended Undertakings for Collective Investments Law or the relevant law of a member state transposing Directive 2009/65/EC, if it is a UCITS management company,

(c) the legislation of the Republic or the legislation of a Member State subject to which an AIF management company is authorised, for the investment management of AIFs, whose assets under management do not exceed the thresholds of article 4(2) of the Alternative Investment Funds Manager Law or the corresponding Article 3, paragraph 2 of Directive 2011/61/EU:

It is provided that, the provisions of paragraphs (b) and (c) shall apply to AIFLNPs as if the reference in this section to article 6(2) is a reference to article 125(1).

(2) When an IF is appointed as the external manager of an AIF, the following shall apply:

(a) the own funds of the external manager shall be adjusted taking into consideration the AIFs’ assets under management∙

(b) any delegation to a third party of functions to be carried out by the external manager shall be performed in accordance with articles 20 to 22 of the Alternative Investment Fund Managers Law, which apply proportionately∙

(c) the external manager shall always act in the best interests of the AIFs it manages, as well as their unitholders and, taking into consideration the aim to ensure the proper functioning and integrity of the market, shall be liable to the unitholders of the AIFs where negligence regarding the management of the AIFs is proven∙

(d) the external manager, taking into consideration the nature of the AIFs it manages-

• shall employ proper administrative and accounting procedures, control and security arrangements regarding the electronic data processing and suitable internal control mechanisms that, especially include, rules regarding the personal transactions of its employees or the possession or management of investments in financial instruments for the purpose of conducting investments in own account and that ensure, at least, that–

(A) for every transaction relating to the AIF it is possible to determine its origin, the parties to the transaction, its character and the place and time conducted∙

(B) that the assets of the AIF, managed by the external manager, are invested in accordance with the fund rules or instruments of incorporation of the AIF, as well as the relevant legislation∙

• shall, proportionately, apply articles 17(3) to (5) and take all reasonable steps to identify conflicts of interest that arise in the course of managing AIFs-

(A) between the external manager, including the persons who effectively direct its business, its employees or any person directly or indirectly linked to the external manager by close links and its clients, and the unitholders of the AIF∙ or

(B) between the AIF under its management or the unitholders of that AIF, and another AIF under its management or the unitholders of the that AIF∙ or

(C) between the AIF under its management or its unitholders, and another client of the external manager∙ or

(D) between the AIFs under its management∙ and

• shall have in place appropriate procedures to ensure the proper handling of complaints of the unitholders of the AIF∙

• shall, proportionately, apply article 16 in relation to risk management and article 18 in relation to liquidity management∙

• shall establish and maintain an internal audit and a legal compliance function, which, where appropriate and proportionate in view of the range, nature, scale and complexity of its business, are independent from the other functions and activities of the external manager.

(3) By way of derogation from sections (1) and (2), for the delegation of functions relating to the AIF’s assets, which are not financial instruments, the external manager may, if it is not an AIFM, delegate the performance of such functions to a third party which may provide the delegated function within the context of its professional or business activities, for the performance of which is subject to professional registration, recognized by the law or an administrative authority or by professional conduct rules∙ the third party who undertakes the delegated function has to provide sufficient financial and professional guarantees to be able to effectively perform the delegated function and to fulfil any obligation arising out of such undertaking:

It is provided that the external manager’s liability shall not be affected by the fact that the external manager has delegated functions to a third party, pursuant to this section.

(4) The Securities and Exchange Commission may, by means of a directive, specify any detail or technical matter regarding the application of sections (2) and (3).