Clearstream has launched a monitoring report to help depositary banks comply with the Alternative Investment Fund Manager (AIFM) directive as the July deadline approaches.
Depositary banks must meet asset monitoring and due diligence requirements under the directive. The Domestic Markets Monitoring Report is designed to help support them manage these new obligations.
“Market participants must now mobilise for the AIFM directive which will enter into force on July 22 2014,” said Berthold Kracke, member of the executive board of Clearstream and head of business management.
He said the report was a “first step to increase transparency in the custody chain”.
The report will also help them to meet similar requirements under Ucits V which will come into force at a later date.
Depositary banks offering custody services on behalf of AIFs will be required to provide a general oversight of the funds’ investment activities to control custody risk in a market or a sub-custodian. In the event of a loss of financial instruments, depositary banks will be liable to restore those instruments.
Clearstream said the monitoring report would ease the burden on depositary banks to monitor the structure and performance of their underlying custody chain for assets held directly through Clearstream in their domestic markets. This information will support the due diligence and regulatory obligations that a customer may be required to perform, particularly when acting as a depositary bank under either the AIFM directive or Ucits V.
The reporting service will initially cover 30 domestic markets and an enhanced service including the full set of market links that Clearstream offers will be available for before the AIFM directive enters into force.
The report provides “full transparency” on the structure of the domestic and information on Clearstream’s network of 53 domestic markets and 90 links to local central securities depositories (CSDs), as well as information on its selection and review process of sub-custodians. Depositary banks can use this information report when reporting to AIFMs.
ICSDs such as Clearstream can directly link to CSDs in local markets but may have to use sub-custody banks in order to link to some CSDs.