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21(13) - AIFMD Provision: Difference between revisions
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{{aifmdanat|21(13)}} | {{aifmdanat|21(13)|}}''See also Article {{aimfdprov|21(12)}} of AIFMD relating to liability for Loss of Financial Instruments Held in Custody.''<br> | ||
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, 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.” | |||
This is liable to go on for a long time. In any other context, they will both agree that the person least able to argue about it — namely, the client — should wear the risk of random sub-custody failure (hey — its their asset after all!) but, alas and alack, that is not an option under [[UCITS]] (Art. ) or AIFMD (Art. {{aifmdprov|21(12)}}). You ''can’t'' stiff the client with liability for your subcustodian failures. | |||
The JC’s sympathy here is with the {{aifmdprov|depositary}}. | |||
{{subcustodian risk}} | |||
{{sa}} | |||
*The {{aifmdprov|Depositary}} regime under AIFMD generally | |||
*{{aifmdprov|21(11)}} - {{aifmdprov|criteria for delegating depositary functions to third parties}} <br> | |||
*{{aifmdprov|21(12)}} - {{aifmdprov|Liability for loss of assets}} <br> | |||
*{{aifmdprov|21(13)}} - {{aifmdprov|Liability not affected by delegation except in certain circumstances}} <br> | |||
{{ref}} | |||