Summary
FUND 3.10 of the FCA Handbook outlines how delegation and sub-delegation arrangements by a full-scope UK AIFM are expected to be structured, overseen and documented. It describes the circumstances in which an AIFM may delegate functions, the conditions that should typically be satisfied before doing so, how sub-delegation is treated, and the limits on delegation to avoid the AIFM becoming a letterbox entity. It also signposts expectations around ongoing review of delegation chains, the treatment of AIFM investment management functions when delegated, and the use of underlying Level 2 measures.
Application
Indicates which full-scope UK AIFMs, AIFs and types of delegation arrangements fall within the scope of the delegation provisions in FUND 3.10.
General delegation requirements
Outlines the core conditions that typically apply when an AIFM delegates functions, including considerations around the choice of delegate, oversight of delegated tasks and the overall delegation structure.
Sub-delegation
Explains how the rules on delegation are applied where a delegate further sub-delegates functions, including the AIFM’s involvement in and awareness of sub-delegation chains.
Delegation of AIFM investment management functions
Describes specific expectations where portfolio or risk management activities are delegated, including restrictions on delegating to certain entities and the management of conflicts of interest.
Letterbox entity
Sets out how the extent and substance of delegation are assessed to determine whether an AIFM risks being treated as a letterbox entity rather than the genuine manager of the AIF.
Liability for delegated functions
Summarises how responsibility for delegated and sub-delegated tasks is treated, including circumstances where the AIFM is expected to remain liable notwithstanding the use of delegates.
Review of delegation and sub-delegation
Highlights expectations for ongoing review and reassessment of delegation and sub-delegation arrangements over time, including consideration of both quantitative and qualitative factors.
Subordinate measures
Signposts AIFMD Level 2 and other technical measures that provide further detail on how the delegation and letterbox concepts in FUND 3.10 are to be interpreted in practice.
