AI Summary of Article 20 Delegation
This document outlines the delegation requirements for Alternative Investment Fund Managers (AIFMs) intending to outsource functions such as portfolio or risk management. AIFMs must notify their home Member State's competent authorities prior to the delegation, ensuring that the delegate possesses the requisite qualifications, resources, and organisational structure to mitigate conflicts of interest.
The AIFM remains liable for delegated functions, and any sub-delegation requires prior consent and notification. Specific conditions apply to ensure that the AIFM is not rendered a 'letter-box entity' and that compliance with the Directive is maintained, irrespective of the delegate’s location or regulatory status.
Article 20 Delegation
1. AIFMs which intend to delegate to third parties the task of carrying out, on their behalf, one or more of the functions referred to in Annex I or of the services referred to in Article 6(4) shall notify the competent authorities of their home Member State before the delegation arrangements become effective. The following conditions shall be met:
(a) the AIFM must be able to justify its entire delegation structure on objective reasons;
(b) 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;
(c) where the delegation concerns portfolio management or risk management, it must be conferred only on undertakings which are authorised or registered for the purpose of asset management and subject to supervision or, where that condition cannot be met, only subject to prior approval by the competent authorities of the home Member State of the AIFM;
(d) where the delegation concerns portfolio management or risk management and is conferred on a third-country undertaking, in addition to the requirements in point (c), cooperation between the competent authorities of the home Member State of the AIFM and the supervisory authority of the undertaking must be ensured;