ESMA · ESMA_QA_1208 Answer Published

Depositaries as counterparties in a transaction of assets that they hold in custody

Regulation
Undertakings for Collective Investment in Transferable Securities Directive (UCITS) Directive 2009/65/EC
Topic
Depositaries
Submitted
2018-07-01
Answered
2018-07-01
Browse UCITS Register → More Q&As on this regulation →

Question

According to Article 22(7) of the UCITS Directive the depositary (or any third party to which the custody function has been delegated) shall not reuse the assets they hold in custody for their own account. Does this provision imply that a depositary (or a delegated third party) should never act as counterparties in a transaction of assets that they hold in custody (including, but not limited to, transfer, pledge, sale and lending of those assets)?

Answer

[ESMA 34-43-392 UCITS Q&A, section 10, Q&A 1] No. A depositary (or a delegated third party) should be able to act as counterparties in a transaction of assets that they hold in custody, provided that (i) the four conditions under Article 22(7)(a) to (d) of the UCITS Directive are complied with, and (ii) conflicts of interest are properly managed and (iii) the transaction is conducted on an arm-length basis.
View original on European Securities and Markets Authority ↗

This Q&A is published by European Securities and Markets Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

Similar Q&As

Depositary tasks entrusted to third parties

Answered 2019-06-01

Distinction between depositary tasks and mere supporting tasks

Answered 2019-06-01

Delegation by a depositary to another legal entity belonging to the same group

Answered 2019-06-01

Performance of depositary functions where there are branches in other Member States

Answered 2019-06-01

KIID Collateral management

Answered 2016-10-01

More Q&As on this topic

Reconciliations with tri-party collateral managers

Answered 2022-07-01

Reconciliation frequency for funds trading on a daily basis

Answered 2022-07-01

Delegation by a depositary to another legal entity belonging to the same group

Answered 2019-06-01

Supervision of depositary functions in case of branches in other Member States

Answered 2019-06-01

Performance of depositary functions where there are branches in other Member States

Answered 2019-06-01

📋 Track EU financial regulation continuously

Forseti monitors EU financial regulation and delivers personalised alerts anchored to verified official sources.

Start free trial → Learn more

14-day free trial. No credit card required.