CHAPTER 2U.K.DEPOSITARY FUNCTIONS, DUE DILIGENCE DUTIES, SEGREGATION OBLIGATION AND INSOLVENCY PROTECTIONF1...

Article 16U.K.Segregation obligation

[F21.Where safekeeping functions have been delegated wholly or partly to a third party, a depositary shall ensure that the third party to whom safekeeping functions are delegated pursuant to [F3rules 6.6B.22, 6.6B.25 and 6.6B.26 of the Collective Investment Schemes sourcebook] acts in accordance with the segregation obligation laid down in [F4rule 6.6B.25(4)(c) of the Collective Investment Schemes sourcebook] by ensuring and verifying that the third party:

(a)correctly records all identified financial instruments in the financial instruments account, which is opened in the third party's books, in order to hold in custody the financial instruments for the depositary's clients, which excludes proprietary financial instruments of the depositary and of the third party and of the third party's other clients, to enable the depositary to match the quantity of the identified financial instruments recorded in the accounts opened in the depositary's books in the name of each of its [F5UK UCITS] clients or in the name of the management company acting on behalf of the [F5UK UCITS];

(b)keeps all necessary records and financial instruments accounts to enable the depositary at any time and without delay to distinguish assets of the depositary's clients from the third party own assets, assets of the third party's other clients and assets held for the depositary for its own account;

F6(c)maintains records and financial securities accounts in a way that ensures their accuracy, and in particular their correspondence to the assets kept safe for the depositary's [F5UK UCITS] clients and on the basis of which the depositary can at any time establish the precise nature, location and ownership status of those assets;

(d)provides the depositary with a statement, on a regular basis and whenever a change in circumstances occurs, detailing the assets of the depositary's [F5UK UCITS] clients;

F7(e)conducts reconciliations, as often as necessary, between its financial instruments accounts and internal records and those of the third party to whom it has delegated custody functions in accordance with [F8rule 6.6B.17(2)(c) of the Collective Investment Schemes sourcebook].

The frequency of the reconciliation shall be determined in accordance with Article 13(1);

(f)introduces adequate organisational arrangements to minimise the risk of loss or diminution of financial instruments or of rights in connection with those financial instruments as a result of misuse of the financial instruments, fraud, poor administration, inadequate record-keeping or negligence;

(g)holds the [F5UK UCITS]' cash in an account or accounts with a central bank of a third country or a credit institution authorised in a third country, provided that the prudential, supervisory and regulatory requirements applied to credit institutions in that third country are considered by the competent authorities of the [F5UK UCITS] home Member States as at least equivalent to those applied in the Union, in accordance with point (c) of Article 22(4) of Directive 2009/65/EC.]

2.Paragraph 1 shall apply mutatis mutandis when the third party, to whom safekeeping functions are delegated in accordance with [F9rules 6.6B.22, 6.6B.25 and 6.6B.26 of the Collective Investment Schemes sourcebook ], has decided to sub-delegate all or part of its safekeeping functions to another third party pursuant to [F10rule 6.6B.27 of the Collective Investment Schemes sourcebook].

Textual Amendments

F6It is purported that in Art. 16(1)(c) the words “rule 6.6B.27 of the Collective Investment Schemes sourcebook” are substituted for the words “the third subparagraph of Article 22a(3) of Directive 2009/65/EC” (31.12.2020) by The Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/325), regs. 1(2), 60(20)(a)(ii) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F7It is purported that in Art. 16(1)(e) the word “authority” is substituted for the words “authorities of the UCITS home Member States” and the words “United Kingdom” are substituted for the word “Union” (31.12.2020) by The Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/325), regs. 1(2), 60(20)(a)(iii)(aa)(bb) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

Textual Amendments