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In a Nutshell™ Clause 22(5):
22(5). The depositary must hold the UCITS’ assets in safekeeping as follows:
- (a) “custodiable” financial instruments:
- (i) hold in them custody (whether in registered form of physically delivered);
- (ii) register all registrable financial instruments in segregated accounts in the depositary’s books so it is clear they belong to the UCITS;
- (b) other assets:
- (i) verify the UCITS’s ownership of the assets based on information provided by the UCITS and any other available evidence;
- (ii) keep an up-to-date record of those assets which it is satisfied that the UCITS owns.
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UCITS V full text of Clause 22(5):
22(5). The assets of the UCITS shall be entrusted to the depositary for safekeeping as follows:
- (a) for financial instruments that may be held in custody, the depositary shall:
- (i) hold in custody all financial instruments that may be registered in a financial instruments account opened in the depositary’s books and all financial instruments that can be physically delivered to the depositary;
- (ii) ensure that all financial instruments that can be registered in a financial instruments account opened in the depositary’s books are registered in the depositary’s books within segregated accounts in accordance with the principles set out in Article 16 of Directive 2006/73/EC (EUR Lex), opened in the name of the UCITS or the management company acting on behalf of the UCITS, so that they can be clearly identified as belonging to the UCITS in accordance with the applicable law at all times;
- (b) for other assets, the depositary shall:
- (i) verify the ownership by the UCITS, or by the management company acting on behalf of the UCITS, of such assets by assessing whether the UCITS or the management company acting on behalf of the UCITS holds the ownership based on information or documents provided by the UCITS or by the management company and, where available, on external evidence;
- (ii) maintain a record of those assets for which it is satisfied that the UCITS or the management company acting on behalf of the UCITS holds the ownership and keep that record up to date.
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Note the depositary may delegate the safekeeping function to a third party 22a only in limited circumstances, one of which being that the delegate (for which read prime broker) cannot reuse the assets for its own account (though it can put them into an agent lending programme): See 22(7).
See also