AIFMD and UCITS V sub-custody asset protection solutions for depositary banks, global custodians and prime brokers

Transcription

1 AIFMD and UCITS V sub-custody asset protection solutions for depositary banks, global custodians and prime brokers

2 Introduction When you delegate something precious, you want to make sure it is in safe hands. Delegating the custody of assets is no exception. We are pleased to provide you sub-custody asset protection solutions to help manage the direct impacts of AIFMD and UCITS V on your business. Our solutions will help you protect your client s assets and let you focus on what you do best.

3 Asset protection under AIFMD and UCITS V The Alternative Investment Fund Managers Directive (AIFMD) entered into force on 22 July UCITS V was adopted in Q and will be transposed at the national level within 18 months following publication in the official journal of the European Union. Both regulations set specific rules on delegation and depositary functions which have a major impact on the custody industry. UCITS V requirements are mostly aligned with AIFMD requirements. In addition, UCITS V brings the latest clarification on the role of the Securities Settlement Systems (SSS). AIFMD/UCITS V and custody In case of delegation (and chains of delegations) of custody, both regulations impose a number of obligations. The most relevant are the following: Liability of the depositary Segregation of assets Effective due diligence for the loss of financial instruments, also when sub deposited including account maintenance, reconciliation, protection from insolvency of the delegate according to the local law including periodic reviews, documented procedure for the selection and monitoring of delegates plus contingency plans BNP Paribas position in the custody chain Prime Broker Investors Funds Depositary Bank Local Custodian Issuer CSDs Global Custodian 3

4 Focus on Liability of the depositary What does the regulation say? The depositary shall be liable to the fund or to the investors of the fund, for the loss by the depositary or a third party to whom the custody of financial instruments has been delegated. How the depository can mitigate their responsibilty AIFMD Commission delegated regulation (EU 231/2013) sets a number of measures aimed at mitigating the responsibility of a depository. Your challenges Assessment of the delegate s financial strength and reputation Assessment of the delegate s procedures and internal control Assessment of the delegate s operational and technological capabilities Assessment of the regulatory and legal framework Our solutions Transparent communication on the financial strength of BNP Paribas and a track record of sharing detailed clarifications when appropriate following market events The strength and capacity to overcome challenging times and has a demonstrated capacity to adapt BNP Paribas Securities Services is a Partnership Limited by shares and a wholly owned subsidiary of BNP Paribas Group BNP Paribas is one of the highest rated banking groups worldwide Recognised as a global systemically important financial institution (G-SIFI), meeting all the advanced standards imposed by the Basel Committee Proactively shared information on systems security, data integrity and protection policies as well as the results from BCP tests Regular internal & external audits to inspect operational risks Supervision by independent teams Comprehensive procedures and clear service level documentation with regular updates to support the review of operational infrastructure Constant monitoring and communication of service delivery via our 360 metrics reporting Continuous investment in platforms and operating hubs across the network BNP Paribas is liable for any loss due to fraud or negligence we may incur Access to local custody experts in all our direct markets Comprehensive standard terms and custody agreements Direct holding at CSD level Local & global legal advice upon request Fixing a hole: the liability of Securities Settlement Systems (SSS) An important change was made in UCITS V by the EU Regulator who provided the latest interpretation and clarification on the liability delegation to a SSS. In UCITS V, recital 21 states that the restitution liability will apply to depositaries who entrust the custody of securities to a CSD or ICSD for securities where the CSD or ISCD is not acting as the issuer CSD/ICSD. This interpretation of the liability delegation should also apply to AIF s depositaries as a matter of consistency as it is the latest view of the EU regulator and addresses the same situation. 4

5 Focus on Segregation of assets What does the regulation say? The depositary shall ensure that all those financial instruments that can be registered in a financial instruments account opened in the depositary s books are registered in the depositary s books within segregated accounts, opened in the name of the AIF or the AIFM acting on behalf of the AIF, so they can be clearly identified as belonging to the AIF in accordance with the applicable law at all times. Asset segregation: what account structure? Segregation plays a key role in protecting your financial instruments from insolvency of a third party. With BNP Paribas Securities Services, financial instruments are always segregated: Within our own books At issuer CSD level, from our proprietary assets where they are ultimately deposited To ensure enhanced transparency and reinforced safety, we offer additional segregation solutions to match your expectations and comply with local practices. Shadow network arrangements available upon request BNP Paribas as agent bank BNP Paribas as account operator CSD BNP Paribas omnibus account for client assets A Securities segregated account (in the name of BNP Paribas) B Securities segregated account (in the client s name) C Client 1 Client 2 Client 3 Mirror A/C s Client 4 Benefits Benefit from BNP Paribas scale when CSD fees are tiered Ease of account opening Maximisation of the internal settlement rate Optimised liquidity generated from cross client netting & pooling A Benefits Enables advanced settlement procedures (speed up pre-matching and ease position control) Reconciliation on an individual basis B Optimised liquidity generated from cross client netting & pooling Benefits Utmost degree of segregation Ease of due diligence Assets fully protected at the final issuance place Possibility to open several mirror accounts (eg For fiscal purposes) Already operating over 90 accounts in 10 markets on behalf of brokers, banks, central counterparties and ICSDs. C 5

6 Focus on Effective due diligence What does the regulation say? The depositary has exercised all due skill, care and diligence in the selection and the appointment of any third party to whom it wants to delegate parts of its tasks, and keeps exercising all due skill, care and diligence in the periodic review and ongoing monitoring of any third party to whom it has delegated parts of its tasks and of the arrangements of the third party in respect of the matters delegated to it. Due diligence assistance local market support jointly coordinated with our operations centre Co-operation with Thomas Murray for BNP Paribas network assessment on-line questionnaire (risk explorer custodian ratings) Standard due diligence Q& A questionnaire available upon request Line of sight processing & reporting 6

7 About us BNP Paribas Securities Services, a wholly-owned subsidiary of the BNP Paribas Group, is a leading global custodian and securities services provider backed by the strength of a universal bank. It provides integrated solutions to all participants in the investment cycle including the buy-side, sell-side, corporates and issuers. Our network is one of the most extensive in the industry with local sub-custody offered in 26 markets, offices in 34 countries and a global network covering more than 100 markets. We bring together local insight and a global network to enable clients to maximise their market and investment opportunities worldwide. Key figures as of 31 March 2014: USD 8,986 billion assets under custody, USD 1,495 billion assets under administration, 7,067 administered funds and 8,225 employees. Contacts Global Contacts Alan Cameron Tel alan.cameron@bnpparibas.com Nadia Diego Tel nadia.diego@bnpparibas.com Local Market Contacts AUSTRALIA Andreas Scharbach Tel: andreas.m.scharbach@bnpparibas.com AUSTRIA Cornelia Raif Tel: cornelia.raif@bnpparibas.com BELGIUM Nathalie Prunier Tel: nathalie.prunier@bnpparibas.com BRAZIL David E Rodrigues Tel: david.e.rodrigues@br.bnpparibas.com COLOMBIA Claudia Calderon Tel: claudia.calderon@co.bnpparibas.com CYPRUS Kelly Kakanaki Tel: kelly.kakanaki@bnpparibas.com FRANCE Nathalie Prunier Tel: nathalie.prunier@bnpparibas.com GERMANY Cornelia Raif Tel: cornelia.raif@bnpparibas.com GREECE Kelly Kakanaki Tel: kelly.kakanaki@bnpparibas.com HONG KONG James O Sullivan Tel: james.osullivan@asia.bnpparibas.com HUNGARY Gyorgy Cselenyi Tel: gyorgy.cselenyi@bnpparibas.com INDIA Christophe Beelaerts Tel: christophe.beelaerts@asia.bnpparibas.com IRELAND Julien Kasparian Tel +44 (0) julien.kasparian@bnpparibas.com ITALY James Woods Tel: james.woods@bnpparibas.com LUXEMBOURG Georg Lasch Tel: georg.lasch@bnpparibas.com MOROCCO Francesco Rossini Tel: francesco.rossini@bnpparibas.com NETHERLANDS Nathalie Prunier Tel: nathalie.prunier@bnpparibas.com NEW ZEALAND Andreas Scharbach Tel: andreas.m.scharbach@bnpparibas.com POLAND Zbigniew Scislowski Tel: zbigniew.scislowski@bnpparibas.com PORTUGAL Nathalie Prunier Tel: nathalie.prunier@bnpparibas.com SINGAPORE Lily Lim Tel: lily.lim@asia.bnpparibas.com SPAIN Soledad Lecube Tel: soledad.lecube@bnpparibas.com SWITZERLAND Neil Collins Tel: neil.collins@bnpparibas.com TURKEY Ertunc Gurson Tel: ertunc.gurson@teb.com.tr UNITED KINGDOM Julien Kasparian Tel +44 (0) julien.kasparian@bnpparibas.com UNITED STATES OF AMERICA Claudine Gallagher Tel: claudine.gallagher@bnpparibas.com 7

8 Follow us on For more information, please visit securities.bnpparibas.com The information contained within this document ( information ) is believed to be reliable but BNP Paribas Securities Services does not warrant its completeness or accuracy. Opinions and estimates contained herein constitute BNP Paribas Securities Services judgment and are subject to change without notice. BNP Paribas Securities Services and its subsidiaries shall not be liable for any errors, omissions or opinions contained within this document. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. For the avoidance of doubt, any information contained within this document will not form an agreement between parties. Additional information is available on request. BNP Paribas Securities Services is incorporated in France as a Partnership Limited by Shares and is authorised and supervised by the ACPR (Autorité de Contrôle Prudentiel et de Résolution) and the AMF (Autorité des Marchés Financiers). BNP Paribas Securities Services, London branch is authorised by the ACPR, the AMF and the Prudential Regulation Authority and is subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority and regulation by the Financial Conduct Authority are available from us on request. BNP Paribas Securities Services, London branch is a member of the London Stock Exchange. BNP Paribas Trust Corporation UK Limited (a wholly owned subsidiary of BNP Paribas Securities Services), incorporated in the UK is authorised and regulated by the Financial Conduct Authority. In the U.S., BNP Paribas Securities Services is a business line of BNP Paribas which is incorporated in France with limited liability. Services provided under this business line, including the services described in this document, if offered in the U.S., are offered through BNP Paribas, New York Branch (which is duly authorized and licensed by the State of New York Department of Financial Services); if a securities product, through BNP Paribas Securities Corp. or BNP Paribas Prime Brokerage, Inc., each of which is a broker-dealer registered with the Securities and Exchange Commission and a member of SIPC and the Financial Industry Regulatory Authority; or if a futures product through BNP Paribas Securities Corp., a Futures Commission Merchant registered with the Commodities Futures Trading Commission and a member of the National Futures Association. Printed on recycled paper by Edit overso Designed by the graphics department, corporate communications, BNP Paribas Securities Services July 2014