Sub-custodian: Difference between revisions

{{a|cass|}}A sub-custodian is a sub-contractor appointed by a main custodian as part of its [[custody network]], to hold [[client asset]]s on behalf of a main custodian — usually to carry out functions that the main custodian can’t. for example, to hold assets in a jurisdiction where the main custodian has no licence to do so.

A sub-custodian therefore doesn’t have a direct [[contract]]ual relationship with the client<ref>Compare with a ''[[delegate]]'', who carries out the main custodian’s client-facing function on its behalf, as described below.</ref>

 

The risks ought to be fairly minimal: Unless the subcustodian is in a weird jurisdiction, it should never take beneficial title to the assets it holds — they should remain the client’s — so they should return to the client even on its insolvency unless it has breached its custody obligations. But if it has breached its custody obligations — owed contractually to the main custodian — the question arises to what extent the main custodian has been complicit in that failure. Was it monitoring the subcustodian’s performance? Was it [[Due dilly|duly diligent]] in appointing it? The Main custodian will wail, and chomp, and complain that it hasn’t priced its business to be responsible for failures of third parties over which it has no control. The client might retort that it ''did'' hold itself out as being in some way competent in holding [[Client asset|customer assets]], and that includes being [[Due diligence|diligent]] in monitoring the performance and capabilities of its custody network — a diligence standard that, for Europeans, is enshrined in {{t|AIFMR}} (Delegated Regulation {{aifmdprov|DR20}}) and {{t|UCITS}} (Article {{ucits5prov|22a}}2(c)).

 

*{{ucitsprov|Depositary}} ({{tag|UCITS V}})