Sub-custody

(1) The depositary may delegate the custody tasks under section 72 to another undertaking (sub-custodian) under the following conditions: 1. the tasks are not delegated with the intention of circumventing the provisions of this Act; 2. the depositary can demonstrate that there is an objective reason for the sub-custody; 3. the depositary exercises the requisite skill, care, and diligence a) in the selection and appointment of a sub-custodian to which it wishes to delegate part of its tasks, unless this sub-custodian is a central securities depository acting in its capacity as a central securities depository on the investor side within the meaning of the delegated act adopted on the basis of Article 29(3) and Article 48(10) of Regulation (EU) No 909/2014, and b) in the ongoing oversight and periodic review of sub-custodians to which it has delegated part of its tasks, and of the arrangements of the sub-custodian in respect of the tasks delegated to it; 4. the depositary ensures that the sub-custodian complies, at all times when carrying out the tasks delegated to it, with the following conditions: a) the sub-custodian has an organisational structure and the expertise that are adequate and suitable for the nature and complexity of the assets of the domestic UCITS, or of the UCITS management company acting for its account, entrusted to it, b) with regard to the custody tasks under section 72(1), point 1, the sub-custodian is subject to effective prudential regulation, including minimum capital requirements, and supervision in the jurisdiction concerned, and to periodic external audits to ensure that the financial instruments are in its possession, c) the sub-custodian segregates the assets of the depositary's clients from its own assets and from the assets of the depositary in such a way that they can, at any time, be clearly attributed to the clients of a particular depositary, d) the sub-custodian takes all necessary steps to ensure that, in the event of its insolvency, the assets of the domestic UCITS held in sub-custody by it cannot be distributed to, or realised for the benefit of, its creditors, e) the sub-custodian complies with the duties and prohibitions under section 68(1), second and third sentence, and under sections 70 and 72.
(2) Where the law of a third country requires certain financial instruments to be held in custody by a local entity, and there are no local entities that satisfy the requirements for appointment under subsection (1), point 4, letter b, namely that the sub-custodian is subject, in respect of the custody tasks under section 72(1), point 1, to effective prudential regulation, including minimum capital requirements, and supervision in the jurisdiction concerned, the depositary may delegate its custody tasks to such a local entity only to the extent, and for as long as, required by the law of the third country, and only where there are no local entities that satisfy the requirements for sub-custody; the first half-sentence applies subject to the following conditions: 1. the UCITS management company has duly informed the investors of the respective domestic UCITS, before they made their investment, a) that such sub-custody is required due to legal constraints in the law of the third country, b) of the risks involved in such delegation, and c) of the circumstances justifying the delegation, and 2. the domestic UCITS, or the UCITS management company acting for the account of the domestic UCITS, must instruct the depositary to delegate the custody of these financial instruments to such a local entity.
(3) The sub-custodian may, under the conditions of subsections (1) and (2), sub-delegate the custody tasks under section 72 to another undertaking. Section 77(3) and (4) applies correspondingly to the parties concerned in each case.
(4) With the exception of the custody tasks under section 72, the depositary may not delegate its tasks laid down under this Subdivision.
(5) For the purposes of this section, the provision of services by a central securities depository acting in its capacity as a central securities depository on the issuer side within the meaning of the delegated act adopted on the basis of Article 29(3) and Article 48(10) of Regulation (EU) No 909/2014 is not regarded as a delegation of the depositary's custody tasks. For the purposes of this section, the provision of services by a central securities depository acting in its capacity as a central securities depository on the investor side within the meaning of the corresponding delegated act is regarded as a delegation of the depositary's custody tasks.
(6) For further details on a depositary's duties under subsection (1), point 3, and on the segregation duty under subsection (1), point 4, letter c, reference is made to Article 15(1) to (8) and Article 16 of Delegated Regulation (EU) 2016/438. For further details on the necessary steps that the sub-custodian, and any undertaking to which the sub-custodian has sub-delegated custody tasks under subsection (3), must take under subsection (1), point 4, letter d, reference is made to Article 17 of Delegated Regulation (EU) 2016/438. For further details on the depositary's duties to ensure that the sub-custodian complies with the conditions under subsection (1), point 4, letter d, reference is made to Article 15(1) to (8) and Articles 16 and 17 of Delegated Regulation (EU) 2016/438.