Home / CY AIFM Law of 2013 / PART ΙΙΙ – OPERATING CONDITIONS FOR AIFMs / CHAPTER 1 - General Requirements /  Section 15 - Conflicts of interest. 

Conflicts of interest.

15.-(1) AIFMs shall take all reasonable steps to identify conflicts of interest that arise in the course of managing AIFs -

(a) between the AIFM, including its managers, employees or any person directly or indirectly linked to the AIFM by control, and the AIF managed by the AIFM or the investors in that AIF; or

(b) between the AIF or the investors in that AIF, and another AIF or the investors in that AIF; or

(c) between the AIF or the investors in that AIF, and another client of the AIFM; or

(d) between the AIF or the investors in that AIF, and a UCITS managed by the AIFM or the investors in that UCITS; or

(e) between two clients of the AIFM.

(2) AIFMs 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 AIFs and their investors; and

(b) segregate, within their own operating environment, tasks and responsibilities which may be regarded as incompatible with each other or which may potentially generate systematic conflicts of interest. AIFMs shall assess whether their operating conditions may involve any other material conflicts of interest and disclose them to the investors of the AIFs; and

(c) assess whether their operating conditions may involve any other material conflicts of interest and disclose them to the investors of the AIFs.

(3) Where organisational and internal administrative arrangements of paragraph (a) of subsection (2) are not sufficient to ensure, with reasonable confidence, that risks of damage to investors interests will be prevented, the AIFM 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.

(4)(a) Where the AIFM on behalf of an 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; and

• provides for any possible transfer and reuse of AIF’s assets and that any such transfer or reuse shall comply with the AIF rules or instruments of incorporation; and

• provides that the depositary shall be informed of the contract.

(b) AIFMs 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.