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Template:External event beyond its reasonable control: Difference between revisions
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The “[[omission]] of a sub-custodian to meet its obligations” — albeit through its [[insolvency]] (and associated failures in internal segregation etc) is thus not an “external event beyond the reasonable control” of the [[depositary]]. Treat this exemption as being limited to genuine [[force majeure]] events — [[acts of God]], war, insurrection, malign operation of the trade winds, etc — or peculiarities in the [[insolvency]] law in the [[sub-custodian]]’s jurisdiction which mean the assets are unavoidably tangled up in the insolvency estate. | The “[[omission]] of a sub-custodian to meet its obligations” — albeit through its [[insolvency]] (and associated failures in internal segregation etc) is thus not an “external event beyond the reasonable control” of the [[depositary]]. Treat this exemption as being limited to genuine [[force majeure]] events — [[acts of God]], war, insurrection, malign operation of the trade winds, etc — or peculiarities in the [[insolvency]] law in the [[sub-custodian]]’s jurisdiction which mean the assets are unavoidably tangled up in the insolvency estate. | ||
Here’s para 28 of the selfsame opinion: | Here’s para 27 and 28 of the selfsame opinion<ref>ibid, page 184.</ref>: | ||
:'' | :''27. As for the insolvency of a [[sub-custodian]], as suggested in the draft advice in relation to the definition of a ‘loss’, [[ESMA]] considers that the [[financial instrument]]s held in [[custody]] by that entity should not automatically be deemed lost since there is a reasonable chance they will be recovered at the end of the legal proceedings thanks notably to the [[sub-custodian]]’s obligation to comply with the [[segregation]] requirements defined in Article {{aifmdprov|21(11)(d)}}(iii) and the corresponding implementing measures. However, [[ESMA]] has identified three situations where [[instrument]]s may be lost following the [[bankruptcy]] of a [[sub-custodian]]: | ||
::''(i) where the sub-custodian failed to implement the segregation rules, | |||
::''(ii) where the law of the country where the instruments were held in custody does not recognise the effects of such segregation requirements and | |||
::''(iii) finally some industry representatives have highlighted that in any insolvency, a small percentage of the assets may be lost due to the disruption in the entity’s activity in relation to its default.<br> | |||
:''28. In the second situation, where the financial instruments are ‘lost’ following the liquidation of a [[sub-custodian]] despite appropriate [[segregation]] of assets, because the law of the country where the [[financial instrument]]s were held in [[custody]] does not recognise the effects of segregation, [[ESMA]] believes that the loss of those financial instruments should be considered due to be an external event, i.e. the local legal/regulatory framework. In the two other situations – ceteris paribus – the depositary would be held liable.'' | |||
These | These situations aside, the [[depositary]] remains liable for the insolvency of [[sub-custodian]]s. Even un[[affiliate]]d ones. <br> | ||