ESMA publishes European Commission Q&As clarifying AIFMs delegating portfolio or risk management to non-supervised undertakings established outside the EU and holding client money

On the 6 January 2025, ESMA published the answers to the two queries that were submitted to the European Commission for clarification about AIFMs delegating portfolio or risk management to non-supervised undertakings established outside the EU and holding client money

The Q&As are as follows:

ESMA QA 2229:                

Q. Are AIFMs allowed to delegate portfolio or risk management to non-supervised undertakings established outside of the EU?

A. No. under point (d) of Article 20(1) of Directive 2011/61/EU, the delegation of portfolio or risk management functions to an undertaking established outside the EU requires that cooperation between the national competent authorities of the AIFM's home Member State and the supervisory authority of the third-country undertaking is ensured. Article 78(3) of Commission Delegated Regulation (EU) No 231/2013 sets out the minimum conditions necessary to ensure this cooperation.

ESMA QA 2230:

Q. Are AIFMs permitted to hold client money, taking into account also the wording of Article 6(4)(b)(ii) of the AIFMD? Will the situation change in light of the legislative amendments introduced following the AIFMD Review (Directive 2024/927/EU).

A. No. Article 6(4)(b)(ii) of Directive 2011/61/EU (“AIFMD”) states that an AIFM may be authorized to provide safekeeping services in relation to shares or units of collective investment undertakings but does not permit AIFMs to safekeep clients’ money. Such a service is, therefore, not compatible with Article 6(4)(b)(ii) of AIFMD. The situation will not change as a result of the extension of the scope of ancillary services under Article 6(4)(b) of the revised AIFMD (Directive (EU) 2024/927).