FUND 3.10 Delegation

This section applies to a full-scope UK AIFM of:

1. (1)

   a UK AIF; and2

2. (2)

   [deleted]2

3. (3)

   a non-UK AIF2

in relation to the delegation of those AIFM management functions for which it is responsible, other than supporting tasks such as administrative or technical functions.

[Note: recital 31 of AIFMD]

An AIFM must ensure the following conditions are met when a delegate carries out any function on its behalf:

1. (1)

   the AIFM has notified the FCA of the delegation before the delegation arrangements become effective; and

2. (2)
   1. (a)

      the AIFM is able to justify its entire delegation structure with objective reasons;

   2. (b)

      the delegate has sufficient resources to perform the respective activity and the persons who effectively conduct the business of the delegate are of sufficiently good repute and experience;

   3. (c)

      (subject to FUND 3.10.7 G) the delegation of AIFM investment management functions is conferred only on a delegate that is authorised or registered for the purpose of asset management and subject to supervision;

   4. (d)

      in addition to (c), where the delegation of AIFM investment management functions is conferred on a non-UK2 delegate, cooperation between the FCA and the supervisory authority of the delegate is ensured;

   5. (e)

      the delegation does not prevent the FCA from supervising the AIFM effectively and, in particular, does not prevent the AIFM from acting, or the AIF from being managed, in the best interests of its investors; and

   6. (f)

      the AIFM is able to demonstrate that:

      1. (i)

         the delegate is qualified and capable of undertaking the functions in question;

      2. (ii)

         it was selected with all due care; and

      3. (iii)

         the AIFM can monitor the delegated activity effectively at any time, give further instructions to the delegate at any time and withdraw the delegation with immediate effect when this is in the interest of investors.

[Note: article 20(1) of AIFMD]

1An AIFM must notify the FCA of delegation arrangements under FUND 3.10.2R (1) using the form in FUND 3 Annex 2 R.

An AIFM must ensure the following conditions are met when any of its delegates carries out a sub-delegation:

1. (1)

   the AIFM has consented to the sub-delegation before the sub-delegation arrangements become effective;

2. (2)

   the AIFM has notified the FCA of the sub-delegation before the sub-delegation arrangements become effective; and

3. (3)

   the conditions in FUND 3.10.2R (2) (General delegation requirements) are satisfied in relation to the sub-delegation, with references to 'delegate' and 'delegation' replaced by references to 'sub-delegate' and 'sub-delegation'.

[Note: article 20(4) of AIFMD]

1An AIFM must notify the FCA of sub-delegation arrangements under FUND 3.10.4R (2) using the form in FUND 3 Annex 2 R.

An AIFM must comply with the rules in this section which are applicable to a sub-delegation in relation to any further sub-delegation of its functions by a sub-delegate.

[Note: article 20(6) of AIFMD]

An AIFM must not delegate or consent to the sub-delegation of AIFM investment management functions to:

1. (1)

   the depositary or a delegate of the depositary; or

2. (2)

   any other entity whose interests may conflict with those of the AIFM or the investors of the AIF, unless:

   1. (a)

      that entity has functionally and hierarchically separated the performance of its AIFM investment management function from its other potentially conflicting tasks; and

   2. (b)

      the potential conflicts of interest are properly identified, managed, monitored and disclosed to the investors of the AIF.

[Note: article 20(2) and (5) of AIFMD]

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

[Note: article 20(3) of AIFMD]

An AIFM must review on an ongoing basis the services provided by each:

1. (1)

   delegate appointed under FUND 3.10.2 R; and

2. (2)

   sub-delegate appointed under FUND 3.10.4 R.

   [Note: article 20(1) and 20(4) of AIFMD]