Article 89
Safekeeping duties with regard to assets held in custody
1.
In order to comply with the obligations laid down in point (a) of Article 21(8) of Directive 2011/61/EU with respect to financial instruments to be held in custody, a depositary shall ensure at least that:
(a)
the financial instruments are properly registered in accordance with Article 21(8)(a)(ii) of Directive 2011/61/EU;
(b)
records and segregated accounts are maintained in a way that ensures their accuracy, and in particular record the correspondence with the financial instruments and cash held for AIFs;
(c)
reconciliations are conducted as often as necessary between the depositary's internal accounts and records and those of any third party to whom custody functions are delegated in accordance with Article 21(11) of Directive 2011/61/EU;
(d)
due care is exercised in relation to the financial instruments held in custody in order to ensure a high standard of investor protection;
(e)
all relevant custody risks throughout the custody chain are assessed and monitored and the AIFM is informed of any material risk identified;
(f)
adequate organisational arrangements are introduced to minimise the risk of loss or diminution of the financial instruments, or of rights in connection with those financial instruments as a result of fraud, poor administration, inadequate registering or negligence;
(g)
the AIF’s ownership right or the ownership right of the AIFM acting on behalf of the AIF over the assets is verified.
In relation to point (c) of the first subparagraph, the frequency of the reconciliations shall be determined on the basis of the following:
(a)
the normal trading activity of the AIF;
(b)
any trade occurring outside the normal trading activity;
(c)
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 AIF.
2.
Where a depositary has delegated its custody functions to a third party in accordance with Article 21(11) of Directive 2011/61/EU, it shall remain subject to the requirements of points (a) to (e) of paragraph 1 of this Article. It shall also ensure that the third party complies with the requirements of points (b) to (g) of paragraph 1 and segregation obligations laid down in Article 99.
3.
A depositary’s safe-keeping duties as referred to in paragraphs 1 and 2 shall apply on a look-through basis to underlying assets held by financial and, as the case may be, or legal structures controlled directly or indirectly by the AIF or the AIFM acting on behalf of the AIF.
The requirement referred to in the first subparagraph shall not apply to fund of funds structures or master-feeder structures where the underlying funds have a depositary which keeps in custody the assets of these funds.