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Matthias Knab, Opalesque:

The fine against CACEIS Bank is the latest chapter in a long-running regulatory saga involving H2O Asset Management (H2O AM). To understand why the regulator is now penalizing the depositary (CACEIS), it is necessary to look at the 'rise and fall' of H2O and its relationship with the illiquid assets that triggered this crisis.

In a recent decision, the Enforcement Committee of French financial regulator AMF imposed a fine of EUR 3.5 million on CACEIS Bank and issued it with a warning in relation to several breaches committed in its capacity as depositary for the funds managed by H2O. The AMF Board had notified CACEIS Bank of objections in its capacity as depositary for seven French-law UCITS that were managed by H2O AM LLP and whose management was subsequently transferred to H2O AM Europe (H2O).

The Committee upheld most of the objections notified. It considered that, contrary to its professional obligations as investment fund depositary, CACEIS Bank had not carried out sufficient checks on the systems put in place by the asset management company to monitor the 'investment ratios' applicable to these UCITS or to value the unlisted securities acquired by them.

It also found that CACEIS Bank had not duly checked the legality of H2O's investment decisions, and in particular H2O's compliance with......................

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