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→Can a {{aifmdprov|depositary}} delegate its functions?
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Liability is covered by Article {{aifmdprov|21(11)}} of {{t|AIFMD}}. The {{aifmdprov|depositary}} is liable to the fund for the loss of custody assets, even where it has delegated the custody function to a third party. Liability is [[strict liability|strict]]: it can only escape liability if the loss was caused by an “an external event beyond its reasonable control, the consequences of which would have been unavoidable despite all reasonable efforts to the contrary”. That doesn’t include delegating to a [[prime broker]]. | Liability is covered by Article {{aifmdprov|21(11)}} of {{t|AIFMD}}. The {{aifmdprov|depositary}} is liable to the fund for the loss of custody assets, even where it has delegated the custody function to a third party. Liability is [[strict liability|strict]]: it can only escape liability if the loss was caused by an “an external event beyond its reasonable control, the consequences of which would have been unavoidable despite all reasonable efforts to the contrary”. That doesn’t include delegating to a [[prime broker]]. | ||
===Can a {{aifmdprov|depositary}} delegate its functions?=== | ===Can a {{aifmdprov|depositary}} [[Delegation|delegate]] its functions?=== | ||
Yes, some of them. This is covered by Article {{aifmdprov|21(11)}} of {{t|AIFMD}}. Importantly, from a prime broker’s perspective, the custody function. If the prime broker holds the asset it not only has security over it, but it can rehypothecate it. As devoted readers of this site will know<ref>Other people might know this too.</ref>, rehypothecation is a very important part of the economics of margin lending. | Yes, some of them. This is covered by Article {{aifmdprov|21(11)}} of {{t|AIFMD}}. Importantly, from a prime broker’s perspective, the custody function. If the prime broker holds the asset it not only has security over it, but it can rehypothecate it. As devoted readers of this site will know<ref>Other people might know this too.</ref>, rehypothecation is a very important part of the economics of margin lending. | ||