Template:Nutshell AIFMD DR89: Difference between revisions

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Article {{aifmdprov|DR89}} {{aifmdprov|Safekeeping duties with regard to assets held in custody}}
Art. {{aifmdprov|DR89}} '''{{aifmdprov|Safekeeping duties with regard to assets held in custody}}''' <br>


1.  In order to comply with the obligations laid down in point (a) of Article {{aifmdprov|21(8)}} of {{t|AIFMD}} with respect to {{aifmdprov|financial instrument}}s to be held in custody, a {{aifmdprov|depositary}} shall ensure at least that:
{{aifmdprov|DR89(1)}}.  To comply with the obligations in Art. {{aifmdprov|21(8)}}(a) of {{t|AIFMD}} with respect to {{aifmdprov|financial instrument}}s to be held in custody, a {{aifmdprov|depositary}} must at least ensure that someone: <br>
:(a) properly registers the {{aifmdprov|financial instrument}}s per Art. {{aifmdprov|21(8)}}(a)(ii);
:(b) accurately maintains accounts to record  the {{aifmdprov|financial instrument}}s and cash held for {{aifmdprov|AIFM}}s;
:(c) regularly reconciles the {{aifmdprov|depositary}}’s own records with sub-custodian it appoints per Art. {{aifmdprov|21(11)}};
:(d) takes due care over custody {{aifmdprov|financial instrument}}s to ensure a high standard of investor protection;
:(e) assesses and monitors all risks throughout the custody chain  and inform the {{aifmdprov|AIFM}} of material ones;
:(f) minimises the risk of loss of or diminution to {{aifmdprov|financial instrument}}s through fraud or negligence;
:(g) verifies the {{aifmdprov|AIF}}’s ownership right over the assets.


:(a)  the  {{aifmdprov|financial instrument}}s are properly registered in accordance with Article {{aifmdprov|21(8)}}(a)(ii) of {{t|AIFMD}};
{{aifmdprov|DR89(2)}}. A {{aifmdprov|depositary}} who delegates custody functions under Art. {{aifmdprov|21(11)}} of {{t|AIFMD}} is still subject to {{aifmdprov|DR89(1)}}(b)<ref>to be replaced by (a) in the 2020 amendment - see commentary.</ref> to (e) and must ensure that the third party complies with Art. {{aifmdprov|DR89(1)}}(b) to (g) and the segregation obligations in Art. {{aifmdprov|DR99}}.
:(b) records and accounts are accurately maintained to record the correspondence with the {{aifmdprov|financial instrument}}s and cash held for {{aifmdprov|AIFM}}s;
:(c) reconciliations are regularly conducted between the {{aifmdprov|depositary}}’s internal records and those of any third party sub-custodian delegated under Article {{aifmdprov|21(11)}} of {{t|AIFMD}};
:(d) due care is exercised over  {{aifmdprov|financial instrument}}s held in custody to ensure a high standard of investor protection;
:(e) all risks throughout the custody chain are assessed and monitored and the {{aifmdprov|AIFM}} informed of material risks;
:(f) arrangements are made to minimise the risk of loss of or diminution to {{aifmdprov|financial instrument}}s through fraud, poor administration, inadequate registering or negligence;
:(g) the {{aifmdprov|AIFM}}’s ownership right over the assets is verified.


2.  Where a {{aifmdprov|depositary}} has delegated its custody functions under Article {{aifmdprov|21(11)}} of {{t|AIFMD}}, it shall remain subject to the requirements of points (b) to (e) of paragraph 1 of this Article. It shall also ensure that the third party complies with the requirements of points (b) to (g) of paragraph 1 of this Article and the segregation obligations laid down in Article {{aifmdprov|DR99}}.
{{aifmdprov|DR89(3)}}.  A {{aifmdprov|depositary}}’s safe-keeping duties in Art. {{aifmdprov|DR89(1)}} and {{aifmdprov|DR89(2)}} apply on a look-through basis to underlying assets held by financial or legal structures controlled directly or indirectly by the {{aifmdprov|AIF}} or its {{aifmdprov|AIFM}}.


3.   A {{aifmdprov|depositary}}’s safe-keeping duties as referred to in paragraphs 1 and 2 shall apply on a look-through basis to underlying assets held by financial and, as the case may be, or legal structures controlled directly or indirectly by the {{aifmdprov|AIFM}} or the {{aifmdprov|AIFM}} acting on behalf of the {{aifmdprov|AIFM}}.
Art.{{aifmdprov|DR89(1)}} will not apply to [[fund of funds]] structures or [[master-feeder structure]]s where the underlying funds have their own {{aifmdprov|depositary}} who is responsible for custody of their assets. <br>
 
The requirement referred to in the first subparagraph shall not apply to fund of funds structures or master-feeder structures where the underlying funds have a {{aifmdprov|depositary}} which keeps in custody the assets of these funds.

Latest revision as of 12:52, 26 September 2019

Art. DR89 Safekeeping duties with regard to assets held in custody

DR89(1). To comply with the obligations in Art. 21(8)(a) of AIFMD with respect to financial instruments to be held in custody, a depositary must at least ensure that someone:

(a) properly registers the financial instruments per Art. 21(8)(a)(ii);
(b) accurately maintains accounts to record the financial instruments and cash held for AIFMs;
(c) regularly reconciles the depositary’s own records with sub-custodian it appoints per Art. 21(11);
(d) takes due care over custody financial instruments to ensure a high standard of investor protection;
(e) assesses and monitors all risks throughout the custody chain and inform the AIFM of material ones;
(f) minimises the risk of loss of or diminution to financial instruments through fraud or negligence;
(g) verifies the AIF’s ownership right over the assets.

DR89(2). A depositary who delegates custody functions under Art. 21(11) of AIFMD is still subject to DR89(1)(b)[1] to (e) and must ensure that the third party complies with Art. DR89(1)(b) to (g) and the segregation obligations in Art. DR99.

DR89(3). A depositary’s safe-keeping duties in Art. DR89(1) and DR89(2) apply on a look-through basis to underlying assets held by financial or legal structures controlled directly or indirectly by the AIF or its AIFM.

Art.DR89(1) will not apply to fund of funds structures or master-feeder structures where the underlying funds have their own depositary who is responsible for custody of their assets.

  1. ↑ to be replaced by (a) in the 2020 amendment - see commentary.
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