Fund Formation and Management

Important Update on UCITS and AIF Depository Rules

The MFSA has issued a circular to Collective Investment Schemes and Depositories notifying them of upcoming changes covering the legal requirements of custodians under the UCITS and AIFMD Directives.

This follows on from the publication in May 2018 of two Commission Delegated Regulations concerning the safe keeping duties of depositories and related amendments published in October 2018.

The proposed changes are designed to strengthen the protection of client assets held in custody by prohibiting the co-mingling of client and depository assets and addressing the frequency of reconciliations.

Also, as anticipated in the draft regulations, a new requirement has been introduced when the depository function has been delegated to a third party outside the member state. In such cases, independent legal advice must be sought in relation to the host country’s laws on insolvency and account segregation.

The changes outlined above will come into effect in April 2020.

Click here to read the full circular issued by the MFSA dated 14th January 2019 with reference to the Commission Delegated Regulations in question.

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