There is wide agreement within CESR that depositaries should have the possibility to delegate certain functions, including custody. Similarly, Members agree that the liability of the depositary is not affected by delegation of custody functions. However, the mapping exercise mentioned above has made clear that Member States take diverging approaches to the liability attaching to a depositary in case of loss of assets by the sub-custodian. CESR is of the view that this situation is not acceptable and that particular focus should be put on developing a harmonised approach. As a first step towards an improved legal framework, almost all CESR Members suggest that the priority should be to clarify and harmonise the duties and functions of UCITS depositaries.

 

CESR makes a number of suggestions on the criteria that should be satisfied before a UCITS can entrust the UCITS’s assets to a third party. These include the condition that the third party be subject to supervision by a public authority in its own jurisdiction; that the presence of the relevant assets be verified on a regular basis by an independent auditor; that the sub-custodian has an adequate and proportionate organisational structure; and that the depositary itself be required to keep adequate records and documentation of its delegation.

 

 

Finally, CESR has a number of concerns regarding the Commission’s stated desire to apply certain elements of the Alternative Investment Fund Managers (AIFM) Directive to the UCITS sphere as regards depositaries. CESR Members do not feel that the AIFM provisions, as currently drafted, and which are in any case subject to change, represent a sound basis for the requirements that should apply to UCITS depositaries. In contrast, CESR sees the proposals in its consultation response as a good starting point for an improved legislative framework for depositaries.