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:

(a) properly register the financial instruments per Art. 21(8)(a)(ii);

(b) accurately maintain accounts to record the financial instruments and cash held for AIFMs;

(c) regularly reconcile the depositary’s own records with sub-custodian it appoints per Art. 21(11);

(d) take due care over custody financial instruments to ensure a high standard of investor protection;

(e) assess and monitor all risks throughout the custody chain and inform the AIFM of material ones;

(f) minimise the risk of loss of or diminution to financial instruments through fraud or negligence;

(g) verify the AIFM’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.

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.