Commission Delegated Regulation (EU) 2018/1619 of 12 July 2018 amending Delegated Regulation (EU) 2016/438 as regards safe-keeping duties of depositaries (Text with EEA relevance.)

Delegated Regulation (EU) 2016/438 is amended as follows:

1. Article 13 is amended as follows:

   1. paragraph 1 is amended as follows:

      1. point (c) is replaced by the following:

         reconciliations are conducted as frequently as necessary between the depositary's internal accounts and records and those of any third party to whom safekeeping has been delegated in accordance with Article 22a of Directive 2009/65/EC.’;

      2. the following second subparagraph is added:

         ‘In relation to point (c) of the first subparagraph, the frequency of the reconciliations shall be determined on the basis of the following:

         1. the normal trading activity of the UCITS;

         2. any trade occurring outside the normal trading activity;

         3. any trade occurring on behalf of any other client whose assets are held by the third party in the same financial instruments account as the assets of the UCITS.’;

   2. paragraph 2 is replaced by the following:

      ‘2.

      Where a depositary has delegated its safekeeping functions, with regard to assets held in custody, to a third party in accordance with Article 22a of Directive 2009/65/EC, it shall remain subject to the requirements of points (a) to (e) of paragraph 1. The depositary shall also ensure that the third party complies with the requirements of points (b) to (g) of paragraph 1;’;

2. in Article 15, the following paragraph 2a is inserted:

   ‘2a.

   A contract by which the depositary appoints a third party to hold assets of that depositary's UCITS clients in custody, shall contain at least the following provisions:

   1. a guarantee of the depositary's right to information, inspection, and access to the relevant records and financial instruments accounts of the third party holding assets in custody to enable the depositary to fulfil its oversight and due diligence obligations and in particular allow the depositary to:

      1. identify all entities within the custody chain;

      2. verify that the quantity of the identified financial instruments recorded in the financial instruments accounts opened in the depositary's books in the name of the UCITS or in the name of the management company acting on behalf of the UCITS matches the quantity of the identified financial instruments held in custody by the third party for that UCITS as recorded in the financial instruments account opened in the third party's books;

      3. verify that the quantity of the identified financial instruments, which are registered and held in a financial instruments account opened at the issuer's Central Securities Depository (‘CSD’) or its agent, in the name of the third party on behalf of its clients, matches the quantity of the identified financial instruments recorded in the financial instruments accounts opened in the depositary's books in the name of each of its UCITS clients or in the name of the management company acting on behalf of the UCITS;

   2. details of equivalent rights and obligations agreed between the third party and another third party, in the event of a further delegation of custody functions.’;

3. in Article 16, paragraph 1 is replaced by the following:

   ‘1.

   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 Article 22a of Directive 2009/65/EC acts in accordance with the segregation obligation laid down in point (c) of Article 22a(3) of that Directive by ensuring and verifying that the third party:

   1. 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 UCITS clients or in the name of the management company acting on behalf of the UCITS;

   2. 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;

   3. 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 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;

   4. provides the depositary with a statement, on a regular basis and whenever a change in circumstances occurs, detailing the assets of the depositary's UCITS clients;

   5. 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 point (c) of Article 22a(3) of Directive 2009/65/EC.

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

   6. 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;

   7. holds the 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 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.’;

4. Article 17 is amended as follows:

   1. in paragraph 2, point (a) is replaced by the following:

      ‘receives legal advice from an independent natural or legal person confirming that the applicable insolvency law recognises the segregation of the assets of the depositary's clients from the third party's own assets, from the assets of the third party's other clients and from the assets held by the third party for the depositary's own account and that the assets of the depositary's UCITS clients do not form part of the third party's estate in case of insolvency and are unavailable for distribution among, or realisation for the benefit of, creditors of the third party to whom safekeeping functions have been delegated in accordance with Article 22a of Directive 2009/65/EC.’;

   2. in paragraph 2, points (d) and (e) are deleted;

   3. paragraph 3 is deleted;

5. in Article 22, paragraph 3 is replaced by the following:

   ‘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 2 available to the competent authority of the UCITS home Member State.’.

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 1 April 2020.