The UCITS and AIFMD regimes set out a number of activities which a fund management company is responsible for and is required to undertake. A fund management company may engage third parties to provide assistance with the performance of certain tasks on a day-to-day basis. Where this happens, the fund management company needs to closely monitor the activities of its delegates on a day-to-day basis. This monitoring is performed by the Fund Management Company’s Designated Persons.
The Fund Management Company Guidance states that the division of responsibilities and tasks should be clearly documented. The purpose of the Designated Person for Regulatory Compliance – Template Letter of Appointment is to clearly document which tasks the Fund Management Company is engaging this Designated Person to oversee.
The tasks to be overseen are listed in annexes to the template letter of appointment. The annexes also contain details of the (i) frequency of reporting from delegates and oversight by the Designated Person, (ii) frequency of reporting from the Designated Person to the board and (iii) parameters for immediate escalation from the Designated Person to the board. As such, the Designated Person for Regulatory Compliance – Template Letter of Appointment is a key part of the reporting framework for the fund management company.
How to use this template
In addition to the general terms of the Designated Person’s appointment, the template letter of appointment contains annexes which list the tasks that the Designated Person is being engaged to oversee. Each annex is divided into 3 parts. Part 1 sets out provisions which relate to all fund management companies. Parts 2 and 3 set out additional tasks that must overseen specifically for AIFMs or UCITS management companies respectively. Parts 2 and 3 are also sub-divided so that Part 2A/3A sets out tasks that relate to the investment funds under management (e.g. carrying out the investment strategy) whereas Part 2B/3B sets out tasks which relate to the fund management company itself (e.g. overseeing that minimum capital requirements are met).