The European Securities and Markets Authority (ESMA) has published an opinion addressed to the European Parliament, the Council of the EU and the European Commission in which it sets out its views on:

• the optimal approach to asset segregation under the framework of both the Alternative Investment Fund Managers Directive (AIFMD) and the UCITS Directive; and
• how the depositary delegation rules should apply to central securities depositaries (CSDs).

In addressing the EU institutions on the optimal approach to asset segregation of financial instruments under the AIFMD and the UCITS Directive, ESMA suggests defining a regime which ensures:

• assets are clearly identifiable as belonging to the alternative investment fund / UCITS consistent with any reuse (where this is permitted by the applicable legislation); and
• investors receive adequately robust protection by avoiding the ownership of the assets being called into question in case of the insolvency of any of the entities in the custody chain.

Considering the above policy goal, and feedback received to earlier consultations, ESMA has come to the conclusion that only minimum EU wide segregation requirements should be prescribed, leaving room for stricter requirements or different account structures if national (ownership, insolvency, tax or fiscal) laws in specific Member States make them necessary.

View ESMA opinion on asset segregation and applying depositary delegation rules to CSDs, 20 July 2017