Home / CY AIFM Law of 2013 / PART ΙΙΙ – OPERATING CONDITIONS FOR AIFMs / CHAPTER 3 - Delegation of AIFM functions /  Section 20 - Delegation of an AIFM functions.

Delegation of an AIFM functions.

20.-(1) AIFMs may delegate to third parties the task of carrying out functions on their behalf, only if the following conditions are met:

(a) the AIFM shall notify the competent authority of its home Member State before the delegation arrangements become effective;

(b) the AIFM must be able to justify its entire delegation structure on objective reasons;

(c) the delegate must dispose of sufficient resources to perform the respective tasks and the persons who effectively conduct the business of the delegate must be of sufficiently good repute and sufficiently experienced;

(d) the delegation must not prevent the effectiveness of supervision of the AIFM, and, in particular, must not prevent the AIFM from acting, or the AIF from being managed, in the best interests of its investors;

(e) the AIFM must be able to demonstrate that the delegate is qualified and capable of undertaking the functions in question, that it was selected with all due care and that the AIFM is in a position to monitor effectively at any time the delegated activity, to give at any time further instructions to the delegate and to withdraw the delegation with immediate effect when this is in the interest of investors;

(f) the AIFM shall review the services provided by each delegate on an ongoing basis;

(g) the AIFM shall not delegate its functions to the extent that, in essence, it can no longer be considered to be the manager of the AIF and to the extent that it becomes a letter-box entity.

(2) Where the delegation concerns part or the whole functions of portfolio management or risk management, the AIFM may delegate to third party the task of carrying functions on its behalf, only if the provisions of subsection (1) and the following provisions are satisfied:

(a) the delegation must be conferred only on undertakings which are authorised or registered for the purpose of asset management and subject to supervision or, only subject to prior approval by the competent authorities of the home Member State of the AIFM;

(b) where the delegation is conferred on a third-country undertaking, cooperation between the competent authorities of the home Member State of the AIFM and the supervisory authority of the undertaking must be ensured;

(c) no delegation shall be conferred on -

• the depositary or a delegate of the depositary; or

• any other entity whose interests may conflict with those of the AIFM or the investors of the AIF, unless such entity has functionally and hierarchically separated the performance of its portfolio management or risk management tasks from its other potentially conflicting tasks, and the potential conflicts of interest are properly identified, managed, monitored and disclosed to the investors of the AIF.