The European Securities and Markets Authority (ESMA) has published its final report containing its technical advice to the European Commission (the Commission) on delegated acts required by the UCITS V Directive.
The UCITS V Directive provides that, when the custody functions are delegated by the depositary to a third party, such a third party shall take “all necessary steps to ensure that in the event of insolvency of the third party, assets of a UCITS held by the third party in custody are unavailable for distribution among or realisation for the benefit of creditors of the third party.” The Commission is empowered to adopt delegated acts specifying the steps to be taken by the third party pursuant to these provisions. ESMA’s advice proposes measures, arrangements and tasks for the third party to which custody is delegated as well as measures to be put in place by the depositary.
The UCITS V Directive states that “in carrying out their respective functions, the management company [and the investment company] and the depositary shall act […] independently and solely in the interest of the UCITS and the investors of the UCITS.” The Commission is empowered to adopt delegated acts specifying the conditions for fulfilling this independence requirement. ESMA’s final advice identifies two types of link between the management company / investment company and the depositary (namely (a) common management / supervision and (b) cross-shareholdings between these entities) which may jeopardise their independence and recommends measures to address the risks that may arise.
View ESMA submits advice on delegated acts required by the UCITS V Directive, 28 November 2014