Commission Delegated Regulation (EU) 2016/438Show full title

CHAPTER 4 INDEPENDENCE REQUIREMENTS AND FINAL PROVISIONS (Article 25 of Directive 2009/65/EC)

Article 20 Management body

For the purposes of this Chapter 'management body of the management company' shall include the management body of the management company or the management body of the investment company.

Article 21 Common management

The management company or the investment company and the depositary shall at all times comply with all of the following requirements:

(a)

no person may at the same time be both a member of the management body of the management company and a member of the management body of the depositary;

(b)

no person may at the same time be both a member of the management body of the management company and an employee of the depositary;

(c)

no person may at the same time be both a member of the management body of the depositary and an employee of the management company or the investment company;

(d)

where the management body of the management company is not in charge of the supervisory functions within the company, no more than one third of the members of its body in charge of the supervisory functions shall consist of members who are at the same time members of the management body, the body in charge of the supervisory functions or employees of the depositary;

(e)

where the management body of the depositary is not in charge of the supervisory functions within the depositary, no more than one third of the members of its body in charge of the supervisory functions shall consist of members who are at the same time members of the management body of the management company, or the body in charge of the supervisory functions of the management company or of the investment company or employees of the management company or of the investment company.

Article 22 Appointment of depositary and delegation of safekeeping

1. The management company or the investment company shall have in place a decision-making process for choosing and appointing the depositary, which shall be based on objective pre-defined criteria and meet the sole interest of the UCITS and the investors of the UCITS.

2. Where the management company or the investment company appoints a depositary to which it has a link or a group link, it shall keep documentary evidence of the following:

(a) an assessment comparing the merits of appointing a depositary with a link or a group link with the merits of appointing a depositary which has no link or no group link with the management company or the investment company, taking into account at least the costs, the expertise, financial standing and the quality of services provided by all depositaries assessed;

(b) a report, based on the assessment referred to in point (a), describing the way in which the appointment meets the objective pre-defined criteria referred to in paragraph 1 and is made in the sole interest of the UCITS and the investors of the UCITS.

3. The management company or the investment company shall demonstrate to the competent authority of the UCITS home Member State that it is satisfied with the appointment of the depositary and that the appointment is in the sole interest of the UCITS and the investors of the UCITS. The management company or the investment company shall make the documentary evidence referred to in paragraph 1 available to the competent authority of the UCITS home Member State.

4. The management company or the investment company shall justify to investors of the UCITS, upon request, the choice of the depositary.

5. The depositary shall have in place a decision-making process for choosing third parties to whom it may delegate the safekeeping functions in accordance with Article 22a of Directive 2009/65/EC, which shall be based on objective pre-defined criteria and meet the sole interest of the UCITS and the investors of the UCITS.

Article 23 Conflicts of interest

Where a link or a group link exists between them, the management company or the investment company and the depositary, shall put in place policies and procedures ensuring that they:

(a)

identify all conflicts of interest arising from that link;

(b)

take all reasonable steps to avoid those conflicts of interest.

Where a conflict of interest referred to in the first subparagraph cannot be avoided, the management company or the investment company and the depositary shall manage, monitor and disclose that conflict of interest in order to prevent adverse effects on the interests of the UCITS and of the investors of the UCITS.

Article 24 Independence of management boards and supervisory functions

1. Where a group link exists between them, the management company or the investment company and the depositary shall ensure that:

(a) where the management body of the management company and the management body of the depositary are also in charge of the supervisory functions within the respective companies, at least one third of the members or two persons, whichever is lower, on the management body of the management company and on the management body of the depositary shall be independent;

(b) where the management body of the management company and the management body of the depositary are not in charge of the supervisory functions within the respective companies, at least one third of the members or two persons, whichever is lower, on the body in charge of the supervisory functions within the management company and within the depositary shall be independent.

2. For the purposes of the first paragraph, members of the management body of the management company, members of the management body of the depositary or members of the body in charge of the supervisory functions of the above companies shall be deemed independent as long as they are neither members of the management body or the body in charge of the supervisory functions nor employees of any of the other undertakings between which a group link exists and are free of any business, family or other relationship with the management company or the investment company, the depositary and any other undertaking within the group that gives rise to a conflict of interest such as to impair their judgment.

Article 25 Entry into force and application

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

It shall apply from 13 October 2016.