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Custodian: Difference between revisions
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==Generally== | |||
*A custodian’s main liability to its client is for the '''safekeeping''' and '''timely return''' of the client’s assets. | *A custodian’s main liability to its client is for the '''safekeeping''' and '''timely return''' of the client’s assets. | ||
*A custodian generally will segregate clients assets from its own assets. | *A custodian generally will segregate clients assets from its own assets. | ||
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**Custody rules would generally exclude the custodian’s liability for losses in this case provided it had diligently selected and monitored the subcustodian in question. | **Custody rules would generally exclude the custodian’s liability for losses in this case provided it had diligently selected and monitored the subcustodian in question. | ||
==={{tag|AIFMD}} and {{tag|UCITS}} | ==[[Escrow agent]]s and [[account control agreement]]s=== | ||
Custodians sometimes act to hold pledged collateral away from its owner, but outside the bankruptcy estate of the pledgee, under an [[account control agreement]]. This can put the custodian in an invidious position, because when the treacle hits the fan, everyone will be shouting at it at once, and it won't know what to do. That will mean it won't do anything. Unless you are prepared to give an [[indemnity]]. | |||
=={{tag|AIFMD}} and {{tag|UCITS}}== | |||
*AIFMD and UCITS require custodians to accept [[strict liability]] for all losses from safe keeping (even where they have diligently selected and monitored a custodian which is insolvent). Therefore, regardless of how diligent the custodian has been if either: | *AIFMD and UCITS require custodians to accept [[strict liability]] for all losses from safe keeping (even where they have diligently selected and monitored a custodian which is insolvent). Therefore, regardless of how diligent the custodian has been if either: | ||
**A sub-custodian has negligently failed to respect appropriate segregation and insolvency remoteness; or | **A sub-custodian has negligently failed to respect appropriate segregation and insolvency remoteness; or | ||