Loss of custody asset - AIFMD Provision

AIFMD Anatomy™ Go Premium {{{2}}} In a Nutshell™ Section DR100: Article DR100 AIFMD 1. Meaning of Loss: A financial instrument held in custody under AIFMD art. 21(12) will be lost by the depositary or the delegated prime broker if any of the following happens: (a) a stated right of ownership of the AIF is demonstrated not to be valid because it either ceased to exist or never existed; (b) the AIF has been definitively deprived of its right of ownership over the financial instrument; (c) the AIF is definitively unable to dispose of the financial instrument. 2. Ascertaining a loss: The AIFM must follow a documented process readily available to the competent authorities when ascertaining such a loss. Once the AIFM ascertains a loss is ascertained, it must immediately notify investors in a durable medium. 3. Conversion of instruments doesn't count: A financial instrument held in custody shall not be deemed to be lost within the meaning of Article 21(12) of Directive 2011/61/EU where an AIF is definitively deprived of its right of ownership in respect of a particular instrument, but this instrument is substituted by or converted into another financial instrument or instruments. 4. Insolvency: If a custodian goes insolvent, the AIFM must ascertain the loss of a financial instrument as soon as one of the conditions listed in paragraph DR100(1) is met with certainty. That will be, at the latest, at the end of the insolvency proceedings. The AIFM and the depositary shall monitor closely the insolvency proceedings to determine whether custody assets held by insolvent custodian are effectively lost. 5. Mens rea not relevant: The fraud, negligence or intention of the custodian holding the asset is irrelevant when determining whether there has been a loss. view template Full text This is an unoffical transcription, may be wrong, buggered up, out of date etc. You should Google the original. view template Directive 2011/61/EU (EUR Lex) | Implementing regulation 231/2013 (EUR Lex) Navigation directive - 21 (depositary) | 21(4) (conflict management) | 21(8) (custody function) | 21(11) (custody delegation) | 21(12) (liability for loss of assets) | 21(13) (discharge of liability on delegation) | 21(14) (discharge of liability for Non-EU subcustodians) | 36 (depo-lite) | 36(1) implementing regulation DR20 (Due diligence when appointing counterparties and prime brokers) | DR76 (objective reason) | DR89 (Safekeeping duties with regard to assets held in custody) | DR91 (reporting obligations for prime brokers) | DR98 (due diligence) | DR99 (segregation obligation) | DR100 (Loss of custody asset) | Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you. Sign up for our newsletter.

Further amplifies the meaning of Art 21(12) pertaining to the depositary’s liability for loss of assets. Much more on that page.