In March 2014, the Central Bank of Ireland (CBI) published consultation paper CP78 “Consultation on carrying out depositary duties in accordance with Article 36 of the AIFMD”. The consultation closed on 30 May 2014 and the CBI has now published responses to the CP and its Feedback Statement.
Details of the original consultation can be found in this INDOS Financial update. CP78 asked what requirements should apply to manage conflicts of interest where an Irish authorised fund administrator provides fund administration services and performs the depositary-lite duties of oversight and cash flow monitoring to the same non-EU alternative investment fund. The CBI stated that ‘such conflicts will arise and they may be substantial’.
In summary, the Feedback Statement does not result in a change to the CBI’s position on depositary-lite. The CBI upheld their view that fund administrators should not be able to perform any of the depositary-lite duties from within their existing administration business. Administrators will be allowed to perform the depositary-lite duties of cash flow monitoring and oversight from a subsidiary entity subject to appropriate management of the potential conflicts of interest. Several respondents also argued that it should not be necessary to hold a CBI authorisation for ‘custodial operations’ in order to perform the Article 21(8)(b) verification of other assets duties – a view that the CBI rejected.