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Alternative Market Briefing

Rules on custody are the focus of most recent UCITS V draft

Monday, December 09, 2013

Beverly Chandler, Opalesque London:

The most recent draft of the UCITS directive finds the Council of the European Union agreeing on an amendment that will tighten rules on custody.

The main priorities of UCITS V are remuneration, aligning depositary rules with those under the AIFM Directive and harmonising the implementation of financial sanctions across European Union Member States with the clear intention of further enhancing investor protection.

The 2nd December note states: "In order to ensure the necessary level of harmonisation of the relevant regulatory requirements in different Member States additional rules should be adopted defining the tasks and duties of depositaries, designating the legal entities that may be appointed as depositaries and clarifying the liability of depositaries in cases UCITS assets are lost in custody or in the case of depositaries' improper performance of their oversight duties."

The note finds that it is necessary to clarify that a UCITS should appoint a single depositary having general oversight over the UCITS's assets. "Requiring that there be a single depositary should ensure that the depositary has a view over all the assets of the UCITS and both fund managers and investors have a single point of reference in the event that problems occur in relation to the safekeeping of the assets or the performance of oversight functions. T......................

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