Knowledge Base
Explain the roles and responsibilities of prime brokers and fund administrators in asset management
Who is responsible for disclosing the identity of the prime broker to investors?
The management company must disclose to investors the identity of the prime broker, as well as the extent of commitments binding the AIF to the prime broker, in accordance with regulatory obligations.
Which service is NOT typically provided by a prime broker?
The prime broker provides specific services such as position financing, trade execution, clearing and settlement of transactions, asset custody services, and securities lending. However, direct management of investment portfolios is not one of its functions, as this falls under the management company's responsibilities.
Which directive imposes specific rules on the delegation of fund administration functions?
Articles 75 to 82 of Delegated Regulation 231/2013 impose strict conditions for the delegation of administration functions, such as objective justification and effective supervision by the management company.
The fund administrator can be the management company itself under French law.
French law does not specifically define the role of fund administrator, which can be performed by the management company itself, by the depositary for certain functions, or by a specialised external service provider under a delegation governed by Article L. 214-24, VIII of the Code monétaire et financier.
Primary function of a fund administrator
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The fund administrator handles the operational, administrative and accounting functions of an investment fund. Its primary function is to calculate the fund's net asset value according to a precise methodology, in compliance with the prospectus and legal requirements.
Categorize items by dragging them to the appropriate zones
Items to categorize:
Prime broker (PB)
Fund administrator (FA)
The prime broker handles functions related to financing and trade execution, while the fund administrator is responsible for calculating the valuation and maintaining the unit-holder register.
A prime broker can simultaneously act as the depositary of an alternative investment fund without any functional separation.
According to Article L. 214-24-9 of the Code monétaire et financier, a prime broker cannot simultaneously act as the depositary of an AIF unless it has functionally and hierarchically separated its depositary and prime brokerage functions, and manages conflicts of interest appropriately.
According to Article L. 214-24, VII of the Code monétaire et financier, what type of entity can be a prime broker?
Article L. 214-24, VII of the Code monétaire et financier defines a prime broker as a credit institution, a regulated investment firm, or another entity subject to prudential regulation. This definition is aligned with Article 4 of the AIFM Directive.