{"id":17770,"date":"2022-09-17T20:19:42","date_gmt":"2022-09-17T20:19:42","guid":{"rendered":"http:\/\/legalblog.ie\/?p=17770"},"modified":"2022-09-25T14:20:42","modified_gmt":"2022-09-25T14:20:42","slug":"depositories","status":"publish","type":"post","link":"https:\/\/legalblog.ie\/depositories\/","title":{"rendered":"Depositories [EU]"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_63 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/legalblog.ie\/depositories\/#Rules_on_the_obligations_of_depositaries_for_EU_investment_funds\" title=\"Rules on the obligations of depositaries for EU investment funds\">Rules on the obligations of depositaries for EU investment funds<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/legalblog.ie\/depositories\/#Written_contract\" title=\"Written contract\">Written contract<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/legalblog.ie\/depositories\/#Due_diligence_and_oversight\" title=\"Due diligence and oversight\">Due diligence and oversight<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/legalblog.ie\/depositories\/#Liability_discharge\" title=\"Liability discharge\">Liability discharge<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/legalblog.ie\/depositories\/#Independence\" title=\"Independence:\">Independence:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/legalblog.ie\/depositories\/#Application\" title=\"Application\">Application<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/legalblog.ie\/depositories\/#MAIN_DOCUMENTS\" title=\"MAIN DOCUMENTS\">MAIN DOCUMENTS<\/a><\/li><\/ul><\/nav><\/div>\n<h3><span class=\"ez-toc-section\" id=\"Rules_on_the_obligations_of_depositaries_for_EU_investment_funds\"><\/span>Rules on the obligations of depositaries for EU investment funds<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Delegated Regulation (EU) 2016\/438 supplementing Directive 2009\/65\/EC with regard to obligations of depositaries<\/p>\n<p>This delegated regulation sets out in detail the specific rights and obligations of depositaries* and management and investment companies under EU rules for undertakings for collective investment in transferable securities (UCITS).<\/p>\n<p>In 2018, it was amended by Regulation (EU) 2018\/1619 in regard to the safe-keeping duties of depositaries. This was due to a divergence in the level of protection for financial instruments held in custody by depositaries as a result of differing national and insolvency laws. The amendment primarily seeks to provide greater clarity and consistency in how assets are kept separated so that investors are better protected and to ensure more market efficiency.<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Written_contract\"><\/span>Written contract<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>The depositary must have a written contract with the investment company or the management company for each of the common funds the latter manages. This must include details such as:<\/p>\n<p>a description of the services to be provided and ways safekeeping, oversight and confidentiality obligations are to be exercised;<br \/>\nrules on the two-way transfer of information between the depositary and the management and investment companies, and with a third party;<br \/>\nprocedures to prevent money laundering and the financing of terrorism, and to provide information when new cash accounts are opened;<br \/>\nconfirmation the depositary may, through access to books and on-site visits, assess the conduct of the management or investment company and the quality of information it receives.<\/p>\n<p>Regulation (EU) 2018\/1619 sets out the minimum details that should feature in the contract between a depositary and a third party on delegation of custody of assets of the depositary\u2019s UCITS clients.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Due_diligence_and_oversight\"><\/span>Due diligence and oversight<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The depositary must have in place procedures to:<\/p>\n<p>assess, when it is appointed, the risks from the nature, scale and complexity of the UCITS\u2019s investment policy and strategy;<br \/>\ndevise, on the basis of that risk assessment, appropriate oversight, including checks and controls on the management or investment company;<br \/>\nensure the sale and redemption of a UCITS assets tally and that proper procedures are in place to value those assets;<br \/>\nverify that instructions from the management or investment company are fully legal;<br \/>\ndetect and inform the management or investment company when payments it is due are late;<br \/>\ncheck the accuracy of dividend payments;<br \/>\nmonitor effectively a UCITS cash flow by, for instance, ensuring its money is in an account with a central bank or authorised credit institution;<br \/>\nreceive from the management or investment company at the end of each business day details of payments made by or on behalf of investors;<br \/>\nensure any UCITS financial instruments which it cannot physically hold itself are properly registered;<br \/>\nguarantee it has access without undue delay to all the information it needs from a management or investment company to carry out its various duties, such as verifying ownership and registering in its records any UCITS assets;<br \/>\napply due diligence and ongoing monitoring when appointing another company to hold in custody the assets of its UCITS clients;<br \/>\nprotect fully the assets of a UCITS client if their custodian in a non-EU country subsequently goes bankrupt.<br \/>\nSegregation obligation<\/p>\n<p>The UCITS Directive requires that where a depositary delegates safekeeping functions to custodians, the assets also need to be segregated at the level of the delegate. Amending Regulation (EU) 2018\/1619 specifies the manner in which this requirement should be met.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Liability_discharge\"><\/span>Liability discharge<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Depositaries, if they have fully carried out their duties, are not liable for any loss in the following circumstances:<\/p>\n<p>natural events beyond human control or influence;<br \/>\nadoption of any law, regulation or decree impacting on the assets they hold in custody;<br \/>\nwar, riots or other major upheaval;<br \/>\nthe UCITS never legally owned the financial instrument, was deprived of its ownership or is unable to dispose of it.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Independence\"><\/span>Independence:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The following rules apply:<\/p>\n<p>No one may be simultaneously member or official of a management company and a depositary\u2019s management board.<br \/>\nLimits exist on joint membership of management and supervisory boards for both partners.<br \/>\nManagement or investment companies must use clear decision-making processes when choosing and appointing depositaries.<br \/>\nConflicts of interest between management or investment companies and depositaries, including their management boards and supervisory functions, must be identified and avoided.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Application\"><\/span>Application<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The regulation has applied since 13 October 2016. The changes introduced to it by Delegated Regulation (EU) 2018\/1619 apply from 1 April 2020.<\/p>\n<p>For more information, see:<\/p>\n<p>Investment funds (European Commission)<br \/>\nSafekeeping duties of depositaries for UCITS funds (European Commission).<br \/>\nKEY TERMS<\/p>\n<p>Depositaries: credit institutions (i.e. deposit-taking banks) or investment firms with regulatory permission to act as custodians of funds.<br \/>\nUCITS: investment vehicles that pool investors\u2019 capital and invest that capital collectively through a portfolio of financial instruments such as stocks, bonds and other securities.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"MAIN_DOCUMENTS\"><\/span>MAIN DOCUMENTS<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Commission Delegated Regulation (EU) 2016\/438 of 17 December 2015 supplementing Directive 2009\/65\/EC of the European Parliament and of the Council with regard to obligations of depositaries (OJ L 78, 24.3.2016, pp. 11-30)<\/p>\n<p>Commission Delegated Regulation (EU) 2018\/1619 of 12 July 2018 amending Delegated Regulation (EU) 2016\/438 as regards safe-keeping duties of depositaries (OJ L 271, 30.10.2018, pp. 6-9)<\/p>\n<p>RELATED DOCUMENTS<\/p>\n<p>Directive 2013\/34\/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006\/43\/EC of the European Parliament and of the Council and repealing Council Directives 78\/660\/EEC and 83\/349\/EEC (OJ L 182, 29.6.2013, pp. 19-76)<\/p>\n<p>Successive amendments to Directive 2013\/34\/EU have been incorporated into the original document. This consolidated version is of documentary value only.<\/p>\n<p>Directive 2013\/36\/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002\/87\/EC and repealing Directives 2006\/48\/EC and 2006\/49\/EC (OJ L 176, 27.6.2013, pp. 338-436)<\/p>\n<p>See consolidated version.<\/p>\n<p>Regulation (EU) No 575\/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648\/2012 (OJ L 176, 27.6.2013, pp. 1-337)<\/p>\n<p>See consolidated version.<\/p>\n<p>Directive 2009\/65\/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, pp. 32-96)<\/p>\n<!--themify_builder_content-->\n<div id=\"themify_builder_content-17770\" data-postid=\"17770\" class=\"themify_builder_content themify_builder_content-17770 themify_builder tf_clear\">\n    <\/div>\n<!--\/themify_builder_content-->\n","protected":false},"excerpt":{"rendered":"<p>Rules on the obligations of depositaries for EU investment funds Delegated Regulation (EU) 2016\/438 supplementing Directive 2009\/65\/EC with regard to obligations of depositaries This delegated regulation sets out in detail the specific rights and obligations of depositaries* and management and investment companies under EU rules for undertakings for collective investment in transferable securities (UCITS). In [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[128,167],"tags":[],"_links":{"self":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/17770"}],"collection":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/comments?post=17770"}],"version-history":[{"count":2,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/17770\/revisions"}],"predecessor-version":[{"id":18366,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/17770\/revisions\/18366"}],"wp:attachment":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/media?parent=17770"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/categories?post=17770"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/tags?post=17770"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}