Sub-custody

(1) The depositary may delegate the custody tasks under section 81 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 AIF, or of the AIF management company acting for its account, entrusted to it, b) with regard to the custody tasks under section 81(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) with regard to special AIF, the sub-custodian may not use the assets without the prior consent of the domestic special AIF, or of the AIF management company acting for the account of the domestic special AIF, and without prior notification to the depositary; for retail AIF, reuse is permissible only under the conditions of section 70(5); with regard to the reuse of financial instruments received as collateral, reference is made to Article 15 of Regulation (EU) 2015/2365 for both special AIF and retail AIF, and e) the sub-custodian complies with the duties and prohibitions under sections 81 and 85(1), (2), and (5).
(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, the depositary may delegate its depositary 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 AIF management company has duly informed the investors of the respective domestic AIF, before they made their investment, a) that such sub-custody is required due to legal constraints in the law of the third country, and b) of the circumstances justifying the delegation, and 2. the domestic AIF, or the AIF management company acting for the account of the domestic AIF, 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 81 to another undertaking. Section 88(3) and (4) applies correspondingly to the parties concerned in each case.
(4) With the exception of the custody tasks under section 81, 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) The depositary's duties of care under subsection (1), point 3, and the segregation duty under subsection (1), point 4, letter c, are determined by Articles 98 and 99 of Delegated Regulation (EU) No 231/2013. For depositaries holding in custody the assets of retail AIF, section 73(1), point 4, letter d, Article 15(1) to (8), and Articles 16 and 17 of Delegated Regulation (EU) 2016/438 additionally apply correspondingly.