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::''(ii) where the law of the country where the instruments were held in custody does not recognise the effects of such segregation requirements and | ::''(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> | ::''(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 | :''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.'' | ||
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> | ||