Liability for loss of assets - AIFMD Provision: Difference between revisions

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Liability for loss of assets - AIFMD Provision (view source)

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-{{aifmdanat|21(12)}} ''Compare with Art. {{ucits5prov|24}} of [[UCITS]]: the equivalent and even more restrictive provision.''
+{{aifmdanat|21(12)|}}''See also Article {{aimfdprov|21(13)}} relating to discharge of liability for delegation. Also, compare with Art. {{ucits5prov|24}} of [[UCITS]]: the equivalent and even more restrictive provision.'' <br>
 A key part of the {{aifmdprov|depositary}}’s responsibility which it will be very keen to foist onto the [[prime broker]] who wishes to hold custody of the {{aifmdprov|AIF}}’s {{aifmdprov|financial instrument}}s.
 See also Article {{aifmdprov|DR100}} of the delegated regulation for even more detail.
-===“[[External event beyond its reasonable control]]”===
+=== You what? ===
-So the unexpected insolvency of a delegate or subcustodian is an event beyond the {{aifmdprov|depositary}}’s reasonable control, right? This was certainly the hopeful expectation of the European Bankiung Federation in its submissions to that effect of September 2013<ref>See [http://www.ebf-fbe.eu/uploads/documents/positions/FinMark/D1444E-2011_EBF_Response_to_ESMA_AIFMD_implementing_measures_consultation.pdf here].</ref>.
+Fun fact: the drafting — perhaps during translation — lost its way in the first paragraph. When you peel away the flannel, it amounts to this:
+{{Quote|The depositary is liable if it, or someone to whom it has delegated the custody of financial instruments, loses —.}}
-''Wrong''. According to ESMA’s final 500-page bunker-busting advice from 2011<ref>Which you can find [https://www.esma.europa.eu/system/files_force/library/2015/11/2011_379.pdf here, at page 182].</ref>:
+Now we think — all right, we ''know'' — this is meant to say  “... loses the financial instruments it is holding in custody”.
-:''The {{aifmdprov|depositary}} will not be liable for the loss of financial instruments held in custody by itself or by a subcustodian if it can demonstrate that all the following conditions are met:
+{{External event beyond its reasonable control}}
-:''1. The event which led to the loss is not a result of an act or omission of the {{aifmdprov|depositary}} '''or one of its {{aifmdprov|subcustodian}}s''' to meet its obligations.
-:''2. The event which led to the loss was beyond its reasonable control i.e. it could not have prevented its occurrence by reasonable efforts.
-:''3. Despite rigorous and comprehensive [[due diligence]], it could not have prevented the loss.''
-The [[omission]] of a {{aifmdprov|subcustodian}} to meet its obligations — albeit through its [[insolvency]] (and associated failures in internal segregation etc) is thus not an “external event beyond the reasonable control” of the {{aifmdprov|depositary}}.
 {{sa}}