Depositary's obligations re safekeeping of assets - AIFMD Provision: Difference between revisions

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-{{aifmdsnap|21(8)}}
+{{aifmdanat|21(8)|}}
-{{nuts|AIFMD|21(8)}}
+A fully authorised {{aifmdprov|AIFM}} must appoint a single {{aifmdprov|depositary}} for each {{aifmdprov|AIF}} it manages. See Article {{aifmdprov|21}}.
-See also the {{aifmdprov|depo-lite}} regime which is applicable only to {{aifmdprov|Non-EU AIF}}s marketed on a private placement basis to professional investors (especially Article {{aifmdprov|36}}.
+===[[Depositary]]’s Functions===
+The [[depositary]] may not be affiliated with the {{aifmdprov|AIFM}} and must be domiciled in the same jurisdiction. Its main roles are:
+*monitoring cashflows;
+*providing safe-keeping of custodiable assets (i.e., being a {{aifmdprov|custodian}});
+*verifying the AIF's ownership interest in non-custodiable assets;
+*overseeing issue, and redemption of fund units;
+*overseeing calculation and publication of {{aifmdprov|NAV}}s;
+*ensuring the AIF’s receives consideration for the sale of its assets within the usual time limits; and
+*maintaining accurate records of the above.
-Also, for giggles, compare {{fcaprov|FUND 3.11.21R}} of the [[Investment Funds sourcebook]] which is the UK implementation of the {{tag|AIFMD}} directive:
+===[[Depositary]]’s liability===
-{{fundsnap|3.11.21R}}
+The {{aifmdprov|depositary}} has almost - eek - [[strict liability]] for the performance of its functions: if it loses an {{aifmdprov|AIF}}'s [[custody assets]], it must return identical financial instruments or the corresponding amount even if the instruments were lost by a [[sub-custodian]]. The {{aifmdprov|depositary}} will not be liable for losses caused by [[force majeure]] which were unavoidable despite all [[reasonable]] efforts to the contrary.
+However, there are strict rules which make this liability less extensive than it seems. Note especially insolvency of a [[sub-custodian]] is not covered.
-{{aifmdanatomy}}
+===Depositaries delegating to [[prime broker]]s===
+A [[prime broker]] to an {{aifmdprov|AIF}} ''could'' be its depositary, but for a bunch of reasons would most likely not be (for one thing, the depositary has to be domiciled in the same jurisdiction and the {{aifmdprov|AIF}}, and [[PB]]s tend to be domiciled in London, New York, Hong Kong etc, and not [[espievie]] jurisdictions; for another, there is an inherent conflict of interest between a depositary function and the [[margin lending]] relationship which is at the heart of what a PB does and how it makes money).
+That said, {{aifmdprov|depositaries}} can ''delegate'' custody tasks to prime brokers provided that they meet certain conditions:
+{{aifmddepositarydelegation}}
+====Discharge of {{aifmdprov|depositary}}'s strict liability====
+Upon delegation the {{aifmdprov|depositary}} remains strictly liable for loss caused by the sub-custodian. The depositary may discharge its liability if it can prove that:
+*The delegation complies with the {{tag|AIFMD}};
+*The {{aifmdprov|sub-custodian}} has expressly accepted the {{aifmdprov|depositary}}'s liability so that the {{aifmdprov|AIF}} may claim directly against the sub-custodian for the loss of financial instruments or for the depositary to make such a claim on their behalf; and
+*The {{aifmdprov|AIF}} expressly allows the depositary to discharge its liability in this way, establishing an {{aifmdprov|objective reason}} for such a discharge.
+===={{aifmdprov|Objective reason}}?====
+The {{aifmdprov|objective reason}} must be established each time the depositary intends to discharge itself of liability, and must be:
+*limited to precise and concrete circumstances; and
+*consistent with the depositary's policies and decisions.
+The following will be deemed to be objective reasons:
+{{sa}}
+*The {{aifmdprov|depo-lite}} regime which is applicable only to {{aifmdprov|Non-EU AIF}}s marketed on a private placement basis to professional investors (especially Article {{aifmdprov|36}}.
+{{ref}}