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Depositary's obligations re safekeeping of assets - AIFMD Provision: Difference between revisions
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Depositary's obligations re safekeeping of assets - AIFMD Provision (view source)
Revision as of 14:52, 9 May 2016
, 9 May 2016→Liability
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**reuse the AIF’s assets without the AIF's express consent. | **reuse the AIF’s assets without the AIF's express consent. | ||
===Liability=== | ===Liability=== | ||
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 casued by [[force majeure]] which were unavoidable despite all reasonable efforts to the contrary. However there are strict rules which make it less extensive than it seems. Note especially insolvency of a sub-custodian is not covered. | 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 casued by [[force majeure]] which were unavoidable despite all reasonable efforts to the contrary. However there are strict rules which make it less extensive than it seems. Note especially insolvency of a sub-custodian is not covered. | ||
===[[Prime broker]]s as depositaries=== | |||
A prime broker to an {{aifmdprov|AIF}} may be appointed as its depositary as long as: | |||
*it has functionally and hierarchically separated its depositary functions from its tasks as prime broker, | |||
*potential conflicts of interest are properly identified, managed and disclosed to the investors of the AIF. | |||
{{aifmdprov|Depositaries}} can delegate custody tasks to one or more prime brokers provided that they meet certain conditions. | |||
Where a prime broker has been appointed as sub-custodian, it must provide to the depositary of the AIF, no later than the close of the next business day to which it relates, a statement in a durable medium which contains the following information: | |||
====Discharge of {{aifmdprov|depositary}}'s strict liability==== | |||
Upon delegation the {{aifmdprov|depositary}} remains strictly liable for any loss caused by the sub-custodian. The depositary may discharge its of 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: | |||