Template:Nutshell AIFMD DR89

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) to (e) and must ensure that the third party complies with Art. DR89(1)(b) to (g) and the segregation obligations in Art. DR99. This to be replaced by: DR89(2). A depositary who delegates its custody functions under Article 21(11) of AIFMD, is still subject to Art.DR89(1)(a) to (e) and must ensure that the third party complies Art.DR89(1)(b) to (g) and segregation obligations in Article 99.’;

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.