Brussels, 09/07/2009 (Agence Europe) - The European Commission has launched a public consultation that will last until Tuesday 15 September. This will examine the depository function of investments covered by the UCITS directive (85/611/EEC). A UCITS depositary fund is an institution in which investors place their savings in every confidence for its security. Its role is to look after the assets it has been requested to manage, in full compliance with European rules for fund managers. The Commission's consultation document explains that the recent Madoff affair and bankruptcy of Lehman Brothers have revealed new risks involved in the depositary function. These cases have demonstrated that to a certain extent, member states interpret the principles of the UCITS directive differently with regard to the exact nature of depositories' obligations and responsibility. This situation is likely to create diverging investor protection within the EU. At the end of May, Commissioner McCreevy, in charge of the internal market, also declared that retail investors should benefit from protection that is more or less equivalent to that envisaged for professional investors in alternative investment funds (EUROPE 9910).
The Commission is asking the interested parties about the need to clarify the obligations of depositaries in asset management. Such clarification could either be transversal or intervene for the different kinds of assets. UCIT investment funds are exposed to risk if a depositary fails in or does not totally comply with their obligations (lost assets, non-respect for obligations linked to asset management or supervisory functions). In the event of lost assets, the Commission asks whether it would be necessary to harmonise the level of depositary responsibility and grant UCITS funds the right to direct and exhaustive compensation. It also asked about clarification of the conditions for enabling a depositary to delegate certain tasks, particularly to entities outside the EU. The draft directive framing the alternative investments (for example, hedge funds and equity funds) requires a depository to be an established and EU-supervised credit establishment (EUROPE 9892). In the case of UCITS, a bank, investment company, central bank or insurance company can play the role of depositary. Alignment of investment fund depositaries (harmonised or alternative) is therefore possible. (M.B./transl.rh)