Global Trustee and Fiduciary Services News and Views Issue 50

Global Trustee and Fiduciary Services News & Views | Issue 50 | 2018 87 Examples of some of the comments from feedback submitted include this from DATA: DATA suggests that the additional proposals on books and records require urgent revision and are fundamentally opposed by DATA. By contrast, introducing any requirement on the depositary to hold records mirroring those of the custodian would not provide any practical benefit for investor protection .... 14 In Ireland, Irish Funds published a similar view, saying: The aspect of the Draft Regulations that Irish Funds is most focused on, is the preservation of the Depositary’s right to delegate the registration and maintenance of the Depositary’s books and records. The Depositary’s regulatory right to delegate this obligation has existed since the introduction of the first UCITS Directive in 1985 and is relied upon as the basis for the predominant operating model throughout the EU. A restriction on the right of the depositary to delegate the maintenance of books and records would be of no benefit to investors and would cause significant disruption to the majority of Depositaries in the EU. It would not increase investor protection. It would fail to enhance the Commission’s safekeeping objectives. It would impose significant costs on Depositaries which would ultimately be borne by investors and it would ignore market practice that has existed throughout the EU for decades. 15 While the AGC states: Moreover...there is no practical reason for the depositary to maintain a custody record of Financial Instruments that is “independent” of that of the delegate. In practice, any such depositary record would simply duplicate that of the delegate’s: any reconciliation inconsistencies arising would simply result from inaccuracies in the process of duplicating the delegate’s records. A separate depositary record would do nothing to provide additional accuracy or investor protection, but it might introduce new risks arising from unnecessary operational complexity (maintaining a duplicate independent record). 16 Despite the feedback and concerns presented by the industry, the European Commission published the delegated regulations amending AIFMD (and UCITS) on 12 July 2018, with little amendment to its drafts. 17, 18 This included retaining a requirement for the depositary to maintain its own books and records.