On 16 November 2011, the European Securities and Markets Authority (“ESMA”) published its final advice to the European Commission (the “Commission”) on possible implementing measures under the Alternative Investment Fund Managers Directive (the “Directive”). Although ESMA’s advice is extensive (over 500 pages), there are some headline issues. There is growing industry concern that ESMA’s advice supports a “strict liability” approach towards depositaries for the acts and omissions of their sub-custodians. The industry is likely to welcome other elements of the advice including ESMA’s proposal that where portfolio or risk management is delegated to an entity outside the EU, that entity need not be subject to regulatory requirements which are identical to those under the Directive.

ESMA’s Technical advice can be read in full by clicking here.