No reuse of assets by depositary - UCITS V Provision: Difference between revisions

No reuse of assets by depositary - UCITS V Provision (view source)

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 *'''[[Pledge]]/[[security interest]]''': Well, if you read literally, Art {{ucits5prov|22(7)}} makes this a non-starter too. Here's a [https://www.esma.europa.eu/sites/default/files/library/esma34-45-277_opinion_34_on_asset_segregation_and_custody_services.pdf legal opinion] on use of assets in {{tag|AIFMD}} and {{tag|UCITS}}:
-:''The regime for {{tag|UCITS}} assets is different [to {{tag|AIFMD}}]: pursuant  [Quotes Article as set out in the panel]
+:''The regime for {{tag|UCITS}} assets is different [to {{tag|AIFMD}}]: pursuant  [Quotes Article as set out in the panel] It is worth recalling the above rules [in Article {{ucits5prov|22(7)}}], in particular to the extent that the ban on the [[reuse]] of the UCITS assets for the {{ucits5prov|depositary}} account should be ensured throughout the chain as it is part of the {{ucits5prov|depositary}}’s [[due diligence]] requirements. Indeed, Article 15(3) of the UCITS V Regulation 2 explicitly foresees that “A {{ucits5prov|depositary}} shall exercise all due skill, care and diligence in the periodic review and ongoing monitoring to ensure that the third party continues to comply with the criteria provided for in paragraph 2 and the conditions set out in [...] Article 22a(3)(a)-(e) of {{t|UCITS V}} and shall at least: […] (d) monitor compliance with the prohibition laid down in [...] Article {{ucits5prov|22(7)}}”.
-. It is worth recalling the above rules [in Article {{ucits5prov|22(7)}}], in particular to the extent that the ban on the reuse of the UCITS assets for the depositary account should be ensured throughout the chain as it is part of the depositary’s due diligence requirements. Indeed, Article 15(3) of the UCITS V Regulation 2 explicitly foresees that “A {{ucits5prov|depositary}} shall exercise all due skill, care and diligence in the periodic review and ongoing monitoring to ensure that the third party continues to comply with the criteria provided for in paragraph 2 and the conditions set out in [...] Article 22a(3)(a)-(e) of {{t|UCITS V}} and shall at least: […] (d) monitor compliance with the prohibition laid down in [...] Article {{ucits5prov|22(7)}}”.
 For Regulatory IM it is probably no biggie that you can’t do anything with it, since you are not really meant to do anything with it anyway. The assets are meant to be immobilised, away from the clutches, insolvency risk and rehypothecatory designs of your broker and the fragile, feather-weight, jacked-up-on-[[vega]] credit-quality of the client.  but for [[ETD]] it’s  a different story. Your broker will need to punt your margin down the line to satisfy its own IM requirements to the clearing house anfd intermediate brokers. If it can’t freely reuse your initial margin, it will have to fund its own. ''And guess who is going to pay for that''.