On 3 July 2012 the EU Commission issued a proposal to amend the UCITS directive covering the depositary safe-keeping and oversight duties, manager remuneration and sanctions, which became commonly known as the “UCITS V” proposal.
Both the Madoff fraud case and the default of Lehman Brothers brought to the fore the weaknesses and lack of harmonisation of the depositary duties and liabilities across different EU countries. In fact, the depositary rules have remained unchanged since the original UCITS Directive came into being in 1985, although the framework had been revised several times over the years. The impetus for new depositary rules also came from the adoption of the Alternative Investment Fund Managers Directive (AIFMD) which regulates the alternative investment funds sector and significantly enhanced the investor protection regime for professional investors, making it all the more urgent to extend the same level of investor protection to retail fund investors.
The Directive entered into force on 17 September 2014. Member States have 18 months to implement the Directive into national law, i.e. until 18 March 2016.
Appointment & eligible entities
Oversight duties (uniform for both contractual & corporate UCITS)
1. Safe-keeping of Financial Instruments:
2. Safe-keeping of all other assets:
A comprehensive inventory of all assets of the UCITS shall be provided by the depositary to the management company or the investment company on a regular basis.
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