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21(13) - AIFMD Provision: Difference between revisions
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The great question of who should be liable for third party {{aifmdprov|sub-custodian}}s. The {{aifmdprov|depositary}} will say, “well, by dint of {{aifmdprov|21(12)}}, I am stuck with more or less absolute liability for loss of the {{aifmdprov|AIF}}’s assets wherever they may be, unless I can get my delegate to accept liability for them.” | The great question of who should be liable for third party {{aifmdprov|sub-custodian}}s. The {{aifmdprov|depositary}} will say, “well, by dint of {{aifmdprov|21(12)}}, I am stuck with more or less absolute liability for loss of the {{aifmdprov|AIF}}’s assets wherever they may be, unless I can get my delegate to accept liability for them.” | ||
The delegate will say, “okay, I can probably live with that for my own affiliates, but what about unaffiliated {{aifmdprov|subcustodian}}s in weirdo jurisdictions? All, kinds of crazy stuff can go on there.” It may even start mumbling about incurring [[Risk-weighted assets|capital charges]] if it takes on liability for third party entities, but is unlikely to be specific because it isn’t clear whether there would be any | The delegate will say, “okay, I can probably live with that for my own affiliates, but what about unaffiliated {{aifmdprov|subcustodian}}s in weirdo jurisdictions? All, kinds of crazy stuff can go on there.” It may even start mumbling about incurring [[Risk-weighted assets|capital charges]] if it takes on liability for third party entities, but is unlikely to be specific because it isn’t clear whether there would be any, and no-one wants to have to enter the netherworld of dialog with the financial reporting folk, to find out. One is never the wiser after a conversation with financial reporting. | ||
The {{aifmdprov|depositary}} says, “well, do your freaking job would you? You are meant to be a professional {{aifmdprov|custodian}}. You are meant to be able to control these things. It is your sub-custody network. Put some controls in place. At least you have the contractual [[privity]] to exercise controls. I don’t even have that.” | The {{aifmdprov|depositary}} says, “well, do your freaking job would you? You are meant to be a professional {{aifmdprov|custodian}}. You are meant to be able to control these things. It is your sub-custody network. Put some controls in place. At least you have the contractual [[privity]] to exercise controls. I don’t even have that.” | ||
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The JC’s sympathy here is with the {{aifmdprov|depositary}}. | The JC’s sympathy here is with the {{aifmdprov|depositary}}. | ||
{{subcustodian risk}} | |||
{{sa}} | {{sa}} | ||