INDOS Submits AIFMD Depositary Application; Langham Hall to Provide Depositary Services for Real Estate and PE Funds

INDOS Financial has submitted an application to the Financial Conduct Authority (FCA) for authorization as a depositary. Fund administrator Langham Hall has also updated its depositary product to offer fund managers whose closed ended real estate and private equity funds are caught by the directive.
By Wicy Wang(2147484160)
INDOS Financial has submitted an application to the Financial Conduct Authority (FCA) for authorization as a depositary.

INDOS plans to provide independent depositary oversight services to hedge fund managers seeking to comply with the Alternative Investment Fund Managers Directive (AIFMD), which becomes law on July 22. The company was established in late 2012 with the sole aim to develop an AIFMD depositary solution for hedge fund managers.

Under the AIFMD, U.K. hedge fund managers marketing offshore hedge funds to European investors are required to comply with the so-called “depositary-lite” regime. These new rules require funds to appoint a firm such as INDOS to perform oversight over fund valuation, subscriptions and redemptions, compliance with laws, regulations and investment guidelines.

Meanwhile, after eighteen months of answering FCA and treasury consultation papers and numerous seminars, fund administrator Langham Hall has updated its depositary product to offer fund managers whose closed ended real estate and private equity funds are caught by the directive.

The FCA Variation of Permissions form (VoP) for depositaries was released on May 31 to firms who had actively engaged the FCA throughout the process. It does appear that there is a commitment to ensure at least a few depositaries will be able to provide a lower priced and more flexible service to closed ended real estate and private equity funds.

However, interpretation by managers, advisors and—indeed—the regulator of certain aspects of the Directive are continuing up to July 22 2013 and beyond. The VoP forms are a case in point, as they are doubling up as consultation papers—prospective depositary firms will need to provide feedback on the content of the forms when submitting them to the FCA.
 There are a number of areas of uncertainty, which unless resolved quickly and carefully will still have a significant impact on who can act as depositary and on whether or not a fund is caught by the directive.

For example, draft FCA rules provide that funds, which “generally” invest in non-financial assets, can appoint a “PE AIF depositary.” The vague jurisdiction of “generally” leads to many interpretation, as does the question of which threshold test to apply to closed ended real estate and private equity funds, said a circular from Langham Hall. Another question addressed whether AIFMD still applies after the investment period of a closed ended real estate has ended.

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