The alternative investment management industry wants European Union regulators to allow depository institutions such as banks to be able to “passport” their services across the EU as new rules governing funds take effect.

Under a proposed fifth version of rules to pan-European UCITS funds, a fund registered in a particular nation must use a depository institution in the same jurisdiction. Instead, institutions allowed to act as UCITS depositories should be able to automatically carry out this role across the EU bloc, argues the Alternative Investment Management Association.

The group’s call comes as the industry faces sweeping new EU rules governing the marketing and operation of alternative funds, such as hedge funds and private equity vehicles. The Alternative Investment Fund Managers Directive is to be implemented from July next year. A controversial issue has been whether funds registered outside the EU – such as in the Cayman Islands or the Channel Islands – will be discriminated against. A key test of whether a jurisdiction is deemed suitable for EU investors is the existence of depository institutions able to act as custodians of client assets.

In its report, AIMA also said new UCITS rules should allow depositaries to discharge their liabilities in certain circumstances. It also argued that the list of eligible assets in which a UCITS fund can invest should be expanded to include commodity derivatives.

The European Commission published its proposal for a UCITS V Directive in July. The final text may be adopted during 2013.