EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 30.03.2004 
COM(2004) 207 final 
  
COMMUNICATION FROM THE COMMISSION 
TO THE COUNCIL AND TO TH E EUROPEAN PARLIAMENT  
Regulation of UCITS depositaries in  the Member States: review and possible 
developments 
 
 2    1. The UCITS depositary plays a specif ic role in protecting investors: 
With around 3,500 billion euros of assets unde r management, UCITS (Undertakings for 
Collective Investment in Transferable Securiti es) – harmonised investment funds – are the 
predominant investment vehicle for the averag e European household. They provide retail 
investors with the benefits of financial market risk diversification and expertise in investment 
management, at reasonable cost, by pooling investors' savings. 
The UCITS depositary is entrusted with sa fekeeping the assets of UCITS funds and 
performing a series of controls for the sake of  investors. Without the depositary, it could be 
far easier for devious fund manage rs to cheat investors on the tr ansactions made or even run 
away with the securities and liquidities owne d by the fund, as has happened in some major 
scandals. Recent investigations in the US ha ve uncovered some worrying malpractice (e.g. 
allegations of hedge funds making illegal transactions in invest ment funds at the expense of 
retail investors), which a sound depositary system  should contribute to prevent (US laws do 
not make it compulsory for US fund managers to have such a depositary, contrary to the EU). 
So the depositary is a crucial pruden tial safeguard for UCITS investors. 
2. The current regulation of UCITS depositaries at EU level: 
Since the creation of the EU lega l framework with Directive 85/611/EEC1, the depositary has 
been one of the three fundamental pillars of  that framework, alongside the fund (UCITS) and 
its manager. But it is subject to a very limited number of principles and duties at EU level.  
2.1 UCITS depositaries are being defined by  default and have no European passport 
The depositary is defined in Article 1a of amende d Directive 85/611/EEC as " any institution 
entrusted with the duties mentioned in Articles 7 and 14 [prudential missions] and subject to 
the other provisions laid down in Sections III a and IV a " of the Directive: this reference 
covers the rather general missions and ob ligations, which the depositary of a unit 
trust/common fund –respectively, of an investment  company– has to fulfill. It is important to 
note that the depositary's legal na ture is thus left to Member  States' discretion. Moreover, a 
UCITS may be authorised only if the compet ent authorities approve the choice of the 
depositary, whose directors must be of sufficiently good repute and sufficiently experienced 
"also in relation to the type of UCITS to be managed " (precision introduced by Directive 
2001/107/EC). 
In terms of resources and s upervision, the Directive only requires the depositary to " furnish 
sufficient financial and professional guarantees to be  able effectively to pursue its business as 
a depositary and meet the commitmen ts inherent in that function ". No precision is included 
regarding the specif ic organisation and intern al controls of the de positary function. Although 
the depositary is " an institution  subject to public control ", it need not necessa rily be subject to 
genuine prudential supervision:  in particular, no reporting obligation to the competent 
authorities is required. 
The Directive also specifies that the depositary mu st have its registered office, either in the 
same Member State as the authorised fund manager (management company or investment 
company), i.e. the Member State where the UCITS is authorised, or in another Member State, 
                                                 
1 Council Directive 85/611/EEC of 20 December 1985, on the coor dination of laws, regulations and administrative 
provisions relating to undertakings for collective investment in securities (UCITS), OJ L 375, 31.12.1985, p.3.  
 
 3    provided it has a branch in the UCITS' Member State – it is then subject to the local UCITS 
competent authorities' approval a nd "public control". This is rest rictive in the modern Internal 
Market. 
2.2 Depositaries have certain prudential duties, but with vague legal content 
The segregation of assets out side the fund management company, which was inspired by the 
lessons of the late-60's IOS scandal, was refl ected in the 1985 Directive by the depositary's 
identification as the entity responsible for sa fe keeping UCITS assets. Similarly, by including 
a list of key prudential controls (see Annex II), the Directive aimed implicitly to curb other 
risks of conflict of interest s on the fund manager's side. 
But the scope of the depositary's liability is not fully specified. The Directive clarifies that it is 
not affected by the fact that depositary has " entrusted to a third party al l or some of the assets 
in its safe-keeping ". However, this does not clarify the exact contents of the "safe-keeping" 
concept (see below). More gene rally, the Directive does not specify whether the performance 
of any control duty is subject to an obligation of result, or rath er to a (lesser) obligation of 
means. The text of the Directive would seem to  support the first interp retation, but this point 
has never been formally confirmed.  
2.3 There are few precise safeguards against conflicts of interest in depositaries 
The Directive incorporates the principle of separation and ethical independence between the 
fund manager and the depositary: both functions  cannot be exercised by the same company 
and both depositary and management company must act " independently and solely in the 
interest of the unit-holders ". But the technical safeguards ar e very limited. The 1985 Directive 
only included two precise pr ovisions: neither a fund mana ger nor a depositary acting on 
behalf of a unit trust could borrow or carry ou t uncovered sales of tr ansferable securities. 
The prerequisites for the outsourcing of func tions by delegation are an other general issue. 
During the negotiations, a gene ral ban on the delega tion of functions by the management 
company to the depositary was eventually restricted to the " core function of investment 
management ". Nonetheless, the Directive does specify  that the delegati on of functions " must 
not prevent the management company from acti ng, or the UCITS from being managed, in the 
best interests of its investors ", and does not affect in any way the management company's or 
the depositary's liability and responsibilities to wards investors and the competent authorities. 
Regarding the depositary, the Dire ctive does not contai n rules on the possible delegation of its 
tasks or functions (excep t for custody of asset). 
3. A fresh policy approach is required at EU level: 
3.1 The Council has mandated a thorough review of the situation 
In transposing the UCITS Directives, Member  States have often included in their own 
regulations a broader list of tasks and orga nisational rules for depositaries, resulting in 
differing requirements across the EU. Therefore, when adopti ng, on 5 June 2001, its joint 
Common Positions regarding fu ture Directives 2001/107/EC2 and 2001/108/EC3, the Council 
                                                 
2 Directive 2001/107/EC of the European Parliament an d of the Council of 21 Janua ry 2002 amending Directive 
85/611/EEC [... ] with a view to re gulating management companies and simplified prospectuses, OJ L 41, 
13.02.2002, p.20.  
3 Directive 2001/108/EC of the European Parliament an d of the Council of 21 Janua ry 2002 amending Directive 
85/611/EEC [... ] with regard to investme nts of UCITS, OJ L 41, 13.02.2002, p.35.  
 
 4    also requested the Commission, in a Decl aration accompanying agreement on these 
Directives, to submit a report " on the regulation of depositaries according to Directive 
85/611/EEC and the need for amending the regula tion, accompanied, wh ere appropriate, by 
a proposal for a revision. " In the negotiations on Dir ective 2001/107/EC, the Council 
Working Party envisaged the inclusion of pr ovisions specifying the depositary's specific 
functions4. However, at the end this was ruled out,  pending prior evaluati on of the need to 
further enhance Community ha rmonisation in this field. 
3.2 Preparing a medium-term policy position 
Article 2(1) of Directive 2001/108/ EC requests the Commission to " forward to the European 
Parliament and the Council a report on the applic ation of Directive 85 /611/EEC as amended 
and proposals for amendments, where appropriate ", by mid-February 2005. It is expressly 
foreseen that the report should "…evaluate the organisation of funds, including the delegation 
rules and practices and the relationshi p between fund manager and depositary" . 
This Communication, which draws on the outcome of a public consultation launched in the 
autumn 20025, concentrates on fulfilling the Co uncil's request on depositaries: 
• it reviews the regulations in force in the Member States; 
• it identifies the prudential issues that the curren t situation raises for the consolidation of the 
Internal Market; 
• it proposes a way forward to remedy the problems. 
In the medium term, some of these issues will  require further in-depth examination, in the 
light of the concrete implementation of  Directive 2001/107/EC regulating UCITS 
management companies, before considering whether any corrective legislative measures 
might be appropriate. The outcome of the work  to be launched followi ng the present report 
will therefore be fed into the 2005 overall UCITS report. 
4. Key policy issues6: 
4.1 Depositaries have no full right of establishment 
Opportunities of cross-border branching do not benefit from a "European passport" based on a 
single authorisation in the depositary's Member St ate of registration: they are subject to case-
by-case approval and control in the UCITS Home Member State. 
4.1.1 The market for depositary services  is highly fragmented across the EU: 
Based on data collected by the Commission serv ices (see Annex III- point 4.3), there are two 
major characteristics of the European UCITS depositary market: 
– National markets, and in particular the larger ones, appear closed to foreign competition. 
Cross-border branching cases are very lim ited: some 30 cases were reported, against 
                                                 
4 Regarding terminology issues on the name "depositary": see Annex I. Regard ing the provisions examined in 2000 
by the Council Working Party: see Annex II.  
5 Almost 100 contributors, with various profe ssional profiles, replied: see Annex III.  
6 Some detailed considerations refl ecting findings of the Commission's cons ultation are included under Annex III –
point 5.  
 
 5    approximately 530 depositaries having their regi stered office in the UCITS' Home Member 
State (end-2002 figures). However, branch-dep ositaries may sometimes control significant 
volumes of assets, and further country-specific precisions may be needed to assess market 
penetration by foreign depositaries. 
– Domestic competitive situations are not co mparable across Member States: whilst on 
average, each depositary (branches included) had in charge around € 6 billion of UCITS 
assets at the end of 2002, national average figures ranged from a pproximately 1 to 40 
billion euros. However raw this indicator may seem, it nonetheless illustrates very heterogeneous degrees of market con centration at Member States' level. 
4.1.2 This reflects cross-border legal and prudential obstacles: 
The limited number of accepted foreign instituti ons reflects reluctance by Member States' 
authorities to rely on a foreign legal and prudential system in the case of depositaries, where supervisory cooperation is not organised
7. This reservation is exacerba ted in regard to the free 
provision of services8. Most of the arguments put forward are also relevant  in respect of 
possible freedom of establishment: the part ial disconnection betw een the supervisory 
authorities in charge of the UCITS and those in charge of the depositary in a context of 
perceived insufficient cooperati on, or the diversity of legal obligation regimes (accounting; 
tax; property rights on securities, etc.). Fragmentation of the European depositary market also 
acts as yet another obstacle to  cross-border fund mergers. 
4.2 The typology of eligible depositaries and related pr udential standards is not 
harmonised 
One of the first barriers to cross-borde r acceptance of foreign depositaries is the 
heterogeneous lists of eligible entities across Member States' regulations. Indeed, the depositary's legal nature, and therefore the type of prudential controls a foreign institution is 
actually subject to, have a bearing on th e perceived level of investor protection. 
4.2.1 A stricter EU typology would contribute to better acceptance of cross-border 
depositaries: 
The variety of certain national t ypologies (see Annex III) should not  hide the fact that, overall, 
credit institutions already have a leading share of the market (in eight Member States, they are 
the only permissible depositaries). It would therefore seem appropr iate to restrict drastically 
the typology of eligible institutions only to those which are subject to consolidated financial supervision, or even to credit institutions –without prejudice to th e possible inclusion of 
Central Banks. This would reflect the majority  situation, facilitate supervisory cooperation 
and mutual recognition of prudent ial standards, and might even contribute to paving the way 
for the acceptance of the free provision of depositary services. It also seems acceptable from a political standpoint (see th e replies of Member States ' authorities under Annex III). 
                                                
 
7 This reluctance may be mitigated by th e creditworthiness of the depositary' s group: competent authorities may 
expect the mother company to settle any legal claims with  its "deep pocket" in order to prevent the depositary's 
reputational risk from jeopardizing the whole group's positi on. Under this assumption, integrated banking groups 
may constitute a positive development factor for cross-border depositary branching, notwithstanding other crucial 
issues (see below on conflicts of interests) , which their organisa tional model may raise.  
8 Only a minority of contributors to the Commission's consul tation were already favourable to such an innovation: 
inter alia, two national supervisory authorities, three fund manager asso ciations and one banking federation.  
 
 6    4.2.2 But the dispersion of capital requirem ents mirrors furth er legal barriers: 
The Commission's consultation has evidenced a strong dispersion in cap ital requirements:  
– Across all categories of depositaries, the range  is between 1 and 900 within the European 
Union (from approximately € 113,000 to € 100 million);  
– Even within one category –credit instituti ons– minimum capital requirements vary from € 
5 million to € 100 million. 
Therefore, restricting the number of eligible categories alone would lik ely fail to boost cross-
border depositary services. To  be effective, any harmonizat ion of depositaries' typology 
would need to go further into detail9, for the following reasons: 
– Overall, operating conditions for depositaries (requirements on internal organisation and 
resources) currently vary across the EU, ev en within the same prudential category (e.g. 
credit institutions), as reflected by the dispersion of capital requirements; 
– Capital requirements also reflect the level of legal risk incurred by the local depositaries. 
Their dispersion across the EU reflects  differences in legal obligations; 
– Depositaries also need minimu m financial resources to cove r investments (e.g. computer 
systems) and meet organizational standards set by national regulati ons. These standards 
may vary in consideration of acceptable pr actice in a given Member State, e.g. which 
depositary tasks may be outsourced, and th e actual criteria taken into account by 
supervisors. Depending on where the actual bala nce is set between detailed written rules 
and case-by-case considerations, the level of e .g. own funds may have mo re or less critical 
importance. 
4.3 Cross-border provision of depositary s ervices is hindered by diverging liability 
regimes: 
4.3.1 Legal uncertainty has a cost borne by investors: 
Two major obstacles hinder the assessment of a de positary's liability across the EU: first, the 
diversity of legal regimes, since the 1985 Directiv e refers to the laws of each Member State; 
second, the sometimes uncertain limits of such liability. In several Member States, although 
the scope of the depositary's minimum respon sibilities is in theory harmonized by the 
Directive, their legal nature, their implemen tation and sanctions are not entirely fixed.  
Depending on the Member State, th e depositary may be subject to an obligation of result, or 
an obligation of means, in the performance of its  prudential duties. This has a direct impact on 
legal certainty. For example, only three Member State competent authorities seem to exclude 
"force majeure " as an extreme waiver of responsibility. 
Legal uncertainty also results from the commin gling of depositary-speci fic legal obligations 
and the broad civil case law. This is especially the case in jurisdictions, where the principle of the depositary's liability according to the Directive (" unjustifiable failure to perform … or 
                                                
 
9 Some Member States in favour of further tightening of the typology would also support harmonised requirements 
on resources and internal organisation.  
 
 7    improper performance ") is, explicitly or not, subject to limitations or derogations. Retail 
investors actually bear a risk (and costs) which are a priori  hidden to them. 
Furthermore, existing investor  compensation schemes may not always guarantee that the 
prejudice will be entirely c overed. In certain legal system s, failing detailed contractual 
provisions, the sharing of the compensation bu rden between fund manager and depositary will 
depend on settlements motivated by reputational concerns, –not by legal pr escriptions. This is 
sometimes considered as unpredictable. In the absence of a firm delimitation of legal risk, 
supervisors will rely on the resources of the gr oup, in preference to developing the market for 
external insurance cover, which seems unlikely to capture all legal risk. 
4.3.2 The meaning of 'asset safek eeping' is not harmonized: 
Safekeeping the assets of a UCITS is the first raison d'être  of the depositary. But the 
Directive does not specify the c ontent of its responsib ility: is it only in charge of prudential 
controls over possible external custodians or is it a full-fledge "keeper" bound by obligations 
towards the manager and the investors,  independently from its controls? 
Across Member States, the mission of asset sa fekeeping may, or not, necessarily involve a 
custodian sub-function. Cust ody is subject to drastic economies of scale and requires 
considerable investments in computer systems distinct from those of  depositary control. A 
second issue which differentiates Member States is whether or not the depositary is really 
subject to an obligation to return the assets, or may limit its liability. 
4.3.3 Clarifying the link between depositary  function and (sub-)custodianship:  
In some Member States, depositaries may ap point a global sub-custodian. Global (sub-) 
custody business is shared between very few banking behemoths, which compete on trillions 
of euros of assets. They also compete with de positaries on the latter's value-added services. 
These are "peripheral" to the depositary's core prudential missions – e.g. collection of 
dividends, proxy votes – but may help cross-s ubsidize the costs of prudential oversight.  
A major issue in the clarification of the depos itary's safekeeping mission (pure controller or 
compulsory prime-custodian) is its potential impact on the quality of depositary controls. 
Should the depositary function be identified with  a role of pure cont roller and completely 
rescinded from the custodian function, the large sub-custodians would be in a position to capture an increasing fraction of custodian fees , but also added-value activities. On the one 
hand, compression of custody margins, by concentr ation of volumes, migh t benefit investors. 
On the other hand, this might also result in  price-led competition between depositaries on 
their core prudential function, thereby jeopardizing, on average,  the quality of  their daily 
oversight on fund managers. 
4.4 Disparate organisational patterns are admitted: 
Although the organisation of tasks may impact, in many cases, the depositary's operational 
risk, the Directive does not include  detailed rules on this matter. 
 
 8    4.4.1 The tasks and obligations mostly reflec t the missions specifi ed in the Directive10: 
Generally, most Member States consider they ha ve set a precise list of tasks and obligations 
for UCITS depositaries. But this list is consider ed exhaustive only in certain Member States, 
which may indicate supervisor y authorities have some leeway to interpret it.  
4.4.2 But the list of permissible activities is  not directly related to the depositary 
function:  
The activities connected with the depositary's function often concern only a fraction of the 
institution's business (the dominant model be ing that of the "universal bank" or the 
multifunctional subsidiary). Most Member States appear to rely on the general list of permissible activities associated to a given type  of institution (e.g. a credit institution). This 
leaves in a grey area those entities which, pr operly speaking, are not subject to a prudential 
regulation: here is, in practice, some leeway for a case-by-case approval by supervisors. Some 
Member States however prohibits certain activities in order to prevent conflicts of interests.  
4.4.3 Specific provisions may affect th e outsourcing of asset custody:  
There are e.g. limitations on the nature of the sub-custodian or its location, or requirements on 
ex-ante checks regarding foreign legal regime s for securities property. Additionally, some 
national legislation provide for a certain  degree of appraisal by supervisors. 
4.4.4 The delegation of depositary duties is subject to differing supervisory 
approaches:  
Most Member State regulations do not set a clear distinction between the depositary's 
administrative and accounting duties and its prudential duties. However, several Member 
States rule out the outsourcing of the depositary's prudential duties. At the same time, the 
doctrine restricting delegation to asset cust ody is a minority one. In between these two 
regulatory standpoints, supervis ors appear to have consider able leeway, but supervisory 
approaches differ: e.g. delegation is subject to prior authorisation in five  Member States, and 
it involves two categories of supervisors in at least nine Member States. Only one Member 
State has no particular procedure, e.g. prelimin ary formalities or monitoring of the delegation.  
4.5 Conflicts of interest and prudential safeguards: 
There is a striking divide in the set up of th e depositary function in Europe, regarding the 
economic relationship between fund manager and de positary: in two Member States, the latter 
cannot belong to the same group as the manager. Neutralizing conflicts of  interest is one of 
the main motivations in voked for this provision. 
Two types of relationships are identified, both by Community legisl ation and by national 
regulations, as the main sources of conflicts of interest for a depositary: those with the UCITS 
itself and those with the management company. Whilst the Directive em phasizes the principle 
that depositary and management company each have to " act independently and solely in the 
interest of unit-holders ", Member States have fleshed out th is rule in rather different ways. 
                                                
 
10 The Directive sets a distinction betw een the duties of a common fund's deposita ry (with a longer list) and those of 
an investment company's depositary (s ee Annex II). However, this asymmetry is not always reflected in national 
regulation: it has been considered, in many jurisdictions, that investment companies' shareholders are unable to 
punish the fund manager's misbehaviour and need the same degree of protectio n as common fund investors.  
 
 9    4.5.1 The UCITS - depositary relationship: 
The variety of positions indicates at the same tim e the diversity of supervisory approaches and 
varying degrees of confidence in the "Chi nese walls" expected from a depositary. 
The depositary itself, or an affiliated entity, may often undertake an ac tivity of investment on 
own account or other activities likely to creat e antagonism between its immediate profits and 
commercial interests, or those of  its group, and the interest of the UCITS' investors. Against 
such risk, in at least eight Member States, th e general regulatory provisi ons simply reflect the 
principles of the Directive.  
However, different approaches coexist, regarding permissible transactions and activities. The 
answers to the Commission's cons ultation have not made it possi ble to conclude whether all 
Member States have set up a list of tran sactions with closel y linked entities ( affiliated 
transactions ) to be subject to particular supervisi on. Clearly, in some situations, insistence on 
non-supervisory safeguards (e.g. conduct of bus iness rules, disclosure) cannot suffice.  
More generally, certain authoriti es defend the idea that no inte rnal procedure or "Chinese 
wall" could be able to eliminate completely the risks of conflict of interest: hence the 
importance of external inspections and, in cases  of possible investor prejudice, out-of-court 
redress rules under the monitoring of competent authorities. 
However, existing supervisory inspections may have differing focuses, depending on whether 
they pertain to mainstream supervision of a gi ven category (e.g. credit institutions) or specific 
supervision of the depositary function. The in sistence on checking the latter's specific 
procedures and safeguards against conflicts of  interest may therefore differ. Moreover, 
focusing on detailed regulati on is not always sufficient to comprehend supervisory 
approaches: "unwritten rules" and the possible preference for case-by-case considerations 
(e.g. of the financial backing of the depositary's group) do matter. 
4.5.2 A striking diversity of relations betw een depositary and management company: 
Management companies can be independent or, quite  often on the continent, integrated within 
a group which may comprise other relevant entities, e.g. brokers, custodians and the 
depositary. However, such group-integra tion does not follow a single model11. Only two 
Member States go as far as prohibiting comm on shareholding or common Board/directors 
membership12. Conversely, four Member States do not have any special provision in this 
field. Member States' regulations leave in some  cases significant leeway to supervisors. 
Additional safeguards are included in ten Memb er State regulations, to a varying extent. 
Flanking supervisory practice also differs. Overa ll, following rules on legal and capital links, 
prescriptions on the depositary's internal contro ls and "Chinese walls" are the most frequently 
reported safeguards.  
                                                 
11 Several group patterns may coexist in a given Member State: e.g. no group  (independent management company) ; 
cases of traditional "captive customer basis" where a manage ment company has to rely on the group depositary, 
which raises issues of internal risk management priorities; or the emergence of "contestable markets" where 
management companies may appoint an external depositary. The depositary func tion then really becomes a "profit 
centre" and a strategic business line.  
12 Situations can be even more complex, since nothing prev ents the sub-custodian from belonging to the same group 
as the management company. But at least, the depositary function is less exposed to risks of conflicts of interest.  
 
 10    Nevertheless, in all the Memb er States, a management comp any is currently allowed to 
delegate a variable fraction of its functions to an entity that has close links with the depositary, or even belongs to its group. Cert ain competent authorities admittedly wonder 
about the need for harmonised safeguards on su ch delegation. The Commission's consultation 
identified 13 tasks or activities: an overview of the mosaic of possible delegations (Annex III) 
leads to the conclusion that, overall, a real convergence in delegati ons rules between fund 
manager and depositary is also a major prere quisite to the development of cross-border 
depositary services. 
4.6 Further harmonisation of investor information 
The vast majority of Member States do not a ppear to have developed more extensive rules 
than the Directive's provisions. However, in light of the discrepancies already identified in the 
present report (e.g. on depositaries' liability, organization of tasks, possible conflicts of 
interest etc.), there a ppears to be a strong need for furt her enhancing the quality of public 
information available to retail investors: contrary to instituti onal investors, they depend fully 
on third parties' diligence to apprehend the ri sks involved in investing in a given UCITS. 
4.6.1 The rules on price information do  not seem to raise major issues 
UCITS depositaries are required by the Directive and national regulations to ensure that the 
value of units is calculated, and transactions on units are carried out in accordance with the 
law and the fund rules. In gene ral, investor information on these rules, in particular 
calculation rules, does not appear at this st age to necessitate addi tional harmonisation. 
However, some specific risk-management point s may call for further harmonisation, but they 
are more of concern for prudential au thorities than for retail investors
13: for example, the 
methodologies for evaluating deri vative positions, or illiquid s ecurities, and the respective 
degrees of involvement of the manage r and the depositary in their setting. 
4.6.2 Increase transparency on the depositary-related costs: 
Retail investors do not choose the depositary, whic h is responsible towa rds them under certain 
conditions laid down by nationa l law. Moreover, the costs (f ees and commissions) related to 
the depositary stem from multiple  factors, sometimes contingent , like the fund's investment 
policy (in particular when the de positary effectively acts as a custodian). As a result, any 
effort to increase comparability in cost disclosu re, either for analysts or retail investors, will 
require: i/ disclosure of the total cost relate d to the depositary (including the possible hidden 
costs, e.g. fee-sharing agreements, of the re lation between manager and depositary) and ii/ 
providing proper synoptic information on the orga nisation and the effective liability of the 
depositary. 
4.6.3 Enhance investor information on the depositary's organisation: 
The depositary may be allowed to delegate ce rtain tasks to external partners (e.g. sub-
custodians). Moreover, it may receive delegatio n mandates from a management company or 
investment company, whilst the re sponsibility remains en trusted to the latter: retail investors 
should be properly informed, at subscription st age or e.g. for the general meeting of an 
                                                 
13 Retail investors will be able to obtain, upon request, the de tail of the methods for calculation and for monitoring of 
the risks, under the terms of new Article 24a of the Directive.  
 
 11    investment company's shareholders14. Moreover, when the fund manager and the depositary 
belong to the same group, which is  intrinsically, by default, a sour ce of conflicts of interest, 
investor information has, first, to draw their attention to this situat ion and, second, spell out 
the Chinese walls and other preventive safeguards against conflicts of interest, as well as any 
redress measures foreseen. In no case should di sclosure be limited to a generic statement on 
the existence of "Chinese walls" without clarifyi ng what can be expected from such measures. 
4.6.4 Ensure proper investor informatio n on the depositary's liability 
Even market practitioners so metimes wonder about the imprecise extent of a depositary's 
liability. Furthermore, depending on Member St ates' laws, retail inve stors may, or not, sue 
directly a UCITS depositary, which may, or  may not be, subject to an irrebuttable 
presumption of misbehaviour: e.g. what woul d a depositary owe, re spectively, to the fund 
manager and to retail investors in ca se of a sub-custodian's winding-up?  
As already pointed out, the consolidation of th e Internal Market for depositary services will 
necessitate convergence of the de positary's liability regimes. This process will take time, 
without prejudice to the more ur gent clarification of some of  its components (e.g. the meaning 
of "asset safekeeping"). In the shorter term, ne vertheless, enhancing investor information will 
simply give them a better understanding of the real costs they would ha ve to bear, after the 
possible intervention of any av ailable compensation scheme. 
5. A comprehensive approach: 
In accordance with the Council's request, this Communication has provided an overall review 
of applicable regulations in the Member St ates. Moreover, this Communication has also 
identified some crucial points where real pr ogress is needed: the ultimate objective is to 
increase the efficiency of the fund manageme nt industry in Europe by consolidating the 
Internal Market, thereby reduc ing costs and risks, includi ng those currently hidden to 
investors, and legal uncertain ties which hinder the emerge nce of cross-border depositary 
services. 
5.1 Fields of action 
In the Commission's view, the following areas  will require additional harmonisation:  
i/ Promote better prevention of conflicts of interests: 
In light of diverging regulatory and superv isory approaches, progress is needed on 
convergence of the prudential frameworks , regarding in particul ar a common typology of 
conflicts of interests  and the necessary prevention and redress measures . This convergence 
should include the lis t of the functions  that the depositary (or an entity of its  group) can 
receive from the fund manager by delegation  and, conversely, the list of the depositary 
activities  which may be delegated.  
                                                 
14 This report does not deal with corporate governance in i nvestment companies (i.e. UCIT S in corporate form); the 
control by their shareholders of a depositary's cost s and performance is just one aspect of the question.  
 
 12     
ii/ Clarify the extent of the depositary's liability : 
Promoting clarity and convergence of  the depositary's liability regimes  across Member States 
will require a common reading of the concept of "asset safekeeping " and of the specific 
control duties  assigned to the depositary.  
iii/ Promote convergence of initial and op erating conditions and, in particular,  
capital requirements : 
The typology of eligible depositary institutions  should be made to converge by identifying a 
specific group of relevant institutions. This might  consist of credit institutions and investment 
firms, subject to additional organisational and resource requirements where appropriate, plus 
relevant public institutions (Central Banks). 
iv/ Enhance transparency standards and investor information : 
This should be the highest short- term priority and help put pre ssure on existing discrepancies. 
Enhanced public information standards should  cover: the organisation of the depositary's 
tasks; measures taken against conflicts of in terest; the depositary's liability; all the costs 
connected to the depos itary's services.  
5.2 A step-by-step approach 
Work should begin with EU regulatory experts to develop: first, standards on investor 
information and conflicts of interest; second, standards on the depositary's missions, resources 
and liability. 
The Commission will take stock of the results of this work, especially by assessing the need 
for possible legislative measures to achieve necessary harmonisation where appropriate. The 
Commission's conclusions will be fed into two reports: 
– A chapter on depositary issues will be attached to the 2005 overall UCITS Report  
requested from the Commission under Article  2 of Directive 2001/108/EC. This sub-report 
will address two questions : 
• Whether and how the relationship between fund manager and depositary  may be 
better regulated by EU legisl ation, especially insofar as preventing conflicts of 
interest  is concerned; 
• Whether and how the typology of elig ible depositary institutions, and 
consequently their missions and resource requirements, might be needed to be 
harmonised by EU legislation.  
– A subsequent report  will review progress on the above-listed points  and on the use of the 
existing branching  possibility for cr oss-border provision  of depositary services. This report 
will evaluate whether there is a need for expanding, through EU legislation, cross-border 
opportunities for a full European passport  for EU depositaries (b ranching under sole Home 
MS responsibility and free provision of services). 
 
 13    5.3 Timetable: 
 Output: Time: 
EU regulatory experts (liaising 
with the Commission) Standards on investor information 
and conflicts of interest By early 2005 
EU regulatory experts (liaising 
with the Commission) Standards on the depositary's 
missions, resources and liability By mid-2005 
Commission Chapter on UCITS in 2005 overall 
UCITS report to the European Parliament and the Council By mid-2005 
Commission Conclusive deposit ary report  By early 2006 
 
 
 14    ANNEX I  
Glossary:  
UCITS (legal form) : depending on the jurisdiction, UCITS can be constituted either under 
the law of contract (as common funds ), or trust law (as trusts ), and (also) under statute, i.e. in 
corporate form (as investment companies ). The Directive may refer to both non-corporate 
forms under one designation, e.g. "common fund" or "u nit trust". Importantly, some Member 
States' legal frameworks are limited to common funds, i.e. all their UCITS are without legal 
personality and depend on a designated extern al fund manager (a management company). 
UCITS' fund manager : either a management company  or a " self-managed investment 
company ". Unlike common funds or unit trusts, corpor ate UCITS, i.e. investment companies, 
may bring together a vehicle (t he fund) and a fund management capacity into the same entity. 
In that case, Directive 2001/107/EC has clarifie d that they should be referred to as 
"investment companies which have not designated a management company " in their 
instruments of incorporation – i.e., self-managed investment companies. In this 
Communication, most of the remarks concer ning the "fund manager" or "management 
company" should also be deemed to apply to se lf-managed investment companies, except that 
these may not receive any task under a de legation mandate, e.g. from the depositary. 
UCITS depositary : it is simply defined by the Directive as an entity entrusted with specific 
prudential missions and subject to a number of  other general provisions (see under point 2.2 
above and Annex II). The UK regulatory designa tion is twofold, according to whether these 
missions have to be achieved with  regard to unit trusts (by a "trustee" ) or with regard to an 
investment company (by a "depository" ). However, for the read er's convenience, only the 
term "depositary" has been used in this Communication. 
It should also be noted that the specific regulatory meaning of  the designation "UCITS  
depositary" is precisely based on the peculiar na ture of these missions and obligations and, 
more generally, of the provisions draw n up under UCITS national regulation from 
Community law15. The scope of the concept of "safekeeping " of assets, to which it is 
particularly related, has thus to  be considered in this spec ific context (see under point 4.3.2). 
Central Securities Depositary (CSD)* : an entity entrusted with the safekeeping and 
administration of securities, which enables se curities transactions to be processed by book-
entry, and may moreover have clearing and se ttlement functions. Among the findings of the 
Commission's Consultation is also the fact that in certain Member States, CSDs are explicitly 
listed in the typology of sub-custodians to which a UCITS depositary may entrust, under 
certain conditions, all or part of  the assets under its safekeeping. 
Custodian* : an entity entrusted with the safekeeping and administration of securities and 
other financial assets on behalf of others , and may moreover provide  additional services, 
including clearing and settlement, cash manageme nt, foreign exchange a nd securities lending. 
                                                 
15 An institution which acts as UCITS depositary may also carry out parallel activities on account of 
collective investment undertakings, which are not covered by the UCITS Directive ("non-UCITS"); 
there are moreover some 'depositaries' which are sp ecialised in non-UCITS, and are not necessarily 
subject to the same prudential rules and duties. 
 
 15    An entity which is entrusted by a custodian with a fraction of the assets under its nominal 
custody is a sub-custodian . 
Global sub-custodian* : a sub-custodian which provides its client, here  the UCITS depositary 
(legal keeper of the assets), with custody services  in respect of securities  traded and settled on 
markets of various countries, through its own netw ork. The global sub-custodian is a single 
interlocutor providing a range of  services which may well overlap with those that the UCITS 
depositary may itself provide to the UCITS fund manager beyond its  core missions of 
prudential control. 
(*) For more details, see: 
- the European Central Bank's Blue Book on " Payments and Securities Settlement Systems in 
the European Union " (June 2001), incl. the glossary; 
- the Second Report of the Giovannini Group on Cleari ng and Settlement Arrangements in the 
European Union , April 2003. 
 
 16    ANNEX II  
The depositary's missions and liability: 
1. The depositary's missions according to the 1985 directive:  1.1. Safekeeping the assets of the UCITS: 
Article 7(1)-(2) for the common fund's depositary  (respectively, Article 14(1)-(2) for the 
investment company's depositary) read:  
1. A unit trust's assets  [respectively, An investment company's assets ] must be entrusted to a 
depositary for safe-keeping .  
2. A depositary's liability as referred to in Article 9  [respectively, in Article 16 ] shall not be 
affected by the fact that it has entrusted to a th ird party all or some of the assets in its safe-
keeping.  
1.2. The other missions: 
They are listed under Article 7(3)  for the common fund's/unit trust' s depositary (respectively, 
under Article 14(3) for the investment company's depositary):  
Article 7(3) (common fund / unit trust): 
A depositary must, moreover: 
(a) ensure that the sale, issue, re-purchase,  redemption and cancellation of units effected 
on behalf of a unit trust or by a management  company are carried out in accordance 
with the law and the fund rules; 
(b) ensure that the value of units is calculated in accordance with the law and the fund 
rules; 
(c) carry out the instructions of the manageme nt company, unless they conflict with the 
law or the fund rules; 
(d) ensure that in transactions involving a unit trust's assets any consideration is 
remitted to it within  the usual time limits; 
(e) ensure that a unit trust's income is applied in accordance with the law and the fund 
rules. 
Article 14(3) (investment company): 
Obligations spelled out in the first, fourth a nd fifth points above (lette rs "a", "d" and "e"). 
2. The depositary's liability in the 1985 directive: 
It is covered by Article 9 for the common fund 's depositary (respectively, Article 16 for the 
investment company's depositary). 
 
 17    Article 9 (Common funds):  
A depositary shall, in accordance with the natio nal law of the State in  which the management 
company's registered office is situated, be  liable to the management company and the unit-
holders for any loss suffered by them as a re sult of its unjustifiable failure to perform its 
obligations or its improper performance of th em. Liability to unit- holders may be invoked 
either directly or indirec tly through the management company , depending on the legal nature 
of the relationship between the depositary, the management company and the unit-holders.  
Article 16 (Investment companies):  
A depositary shall, in accordan ce with the national law of the State in which the investment 
company's registered office is situated, be liable to the investme nt company and the unit-
holders for any loss suffered by them as a re sult of its unjustifiable failure to perform its 
obligations, or its imprope r performance of them.  
3. Provisions examined by th e Council Working Party:  
Proposed in the autumn 2000, the addition of such provisions was ruled out pending further 
evaluation of the need to furthe r harmonisation in this field.  
SECTION IIIa 
Obligations regarding the depositary 
Articles 7 and 8 shall be modified as follow.  
1.-at the end of article 7 para graph 2: "the Deposit ary shall not delegate its functions of 
control of the UCITS" and  
-at the end of this article: "The description of  the functions of the de positary is detailed in 
Annex III."  
2. The following sentence shall be added at the end of Paragraph 2 of article 8:  
"It must communicate to the UCITS competent authority a programme of activity setting out, 
inter alia, its organisational structure and its  procedures. The depositary must have sound 
administrative and accounting procedures, control and safeguard arrangements for 
electronic data processing and adequate internal control mechanisms. It must communicate 
to the UCITS competent authority any informa tion required to monitor compliance with the 
above conditions on a continuous basis.  
Proposed Annex III:  
Bookkeeping of Custody accounts:  
– accounting for cash accounts and securities a ccounts in the name of the UCITS;  
– safekeeping of assets and their transfer on demand of the UCITS, according to the 
measures laid down by the market authorities;  
– settlement of instructions from the management company; 
– clearing of derivatives instrument s traded on regulated markets;  
 
 18    – payment of dividends and income on asse ts held in the name of the UCITS;  
– processing corporate actions on these assets;  
– tax treatment linked to the UCITS;  
– centralising purchases and redemptions when  the UCITS is not listed on a market.  
Compliance:  
The Depositary shall check the compliance with, and ensure the respect of the management 
company of, the:  
– prudential investment rules;  
– investment policy set out in the info rmation sheet or the prospectus;  
– regulatory framework applying to UCITS;  
– rules for calculating the value of UCITS units;  
Furthermore, the Depositary ensu res control of respect of the legal formalities of the UCITS.  
 
 19    ANNEX III  
Main lessons of the consultation carried out by Commission services on the regulation of 
UCITS depositaries in the Member States:  
1. Background:  
The consultation 16 was launched on 5 September 2002, and was closed on 19 November after 
receipt of the very last  answers from some Member State s upervisory authorities. Overall, the 
Commission services received 97 answers. 
Not all respondents answered the full set of questi ons: in general, more than 80 contributions 
were made on each of the Sections A to F (regulat ory issues), but in several cases contributors 
only provided few answers per Section. Moreover, in  a number of cases, very similar, if not 
identical responses were made by several institut ions. Under these conditions , it is important to 
consider with precaution the data resulting from  the aggregation of all the answers collected 
through the consultation. 
Against this background, the presentation wh ich follows, after introducing a typology of 
contributors, will illustrate some of the main le ssons of the consultation from a regulatory point 
of view (based the answers provided by the comp etent authorities of th e 15 Member States).  
2. The contributors' professional typology:  
The consultation made it possibl e in particular to collect, inter alia , the views of the competent 
authorities in the 15 Member States. 
A second substantial category of contributors comprises those professional bodies, which felt 
concerned with the consultation at Member State-level: 
- ten national fund mana gers associations; 
- one savings bank associations; - five national banking federations; - two national depos itary association; 
- two specific contributions from  a national Chamber of commerce and an association of finance 
companies. 
Some 60 remaining answers were made by "mar ket practitioners" (even though not all such 
contributors labeled themselves as such): 
– close to 40 replies concerning th e depositary activity as such (official replies on behalf of 
depositary institutions and additional replies by bank managers); 
– 9 replies by fund managers; 
                                                
 
16 The text (in Word format) is av ailable at the following address: 
http://europa.eu.int/comm/internal_market/en/finances/mobil/ucits/2002-consult/index_en.htm   
 
 20    – 3 replies clearly identified as contributing th e viewpoint of a credit institution exclusively 
outside the depositary business; 
– one reply by a law firm; 
– one reply by an audit company; 
– additionally, a half-dozen replies coming from credit institutions combining various profiles. 
At European level, off-line contributions were made on behalf of the European fund managers 
association (FEFSI) and a cross-nation al retail investors' association. 
It is also worth noting, first, th at no natural person involved in de positary activities replied to the 
consultation (although it appears this is legally possible in at leas t one Member State, based on 
contributions by supervisory authorities)17. Second, no retail investor c ontributed as such to the 
consultation. 
All in all, a majority of responses were contri buted by practitioners who are involved in various 
respects in depositary matters and hence may ha ve varying degrees of knowledge of the legal 
issues raised in the questionnaire; this may help  understand why ten contribu tors had reservations 
(“expectations not met”) on the questionnaire;  eight of them clarified their grounds:  
- not relevant ("irrelevant in content"): 4 answers;  
- too complicated ("too difficult to understand"): 2 answers;  
- too long: 1 answer;  
- too much technical: 1 answer.  Approximately 90% of on-line contributors were sa tisfied with the content of the consultation.  
3. Geographic breakdown of the contributions:  
Four Member States account for appr oximately 61% of the contributions.  
LU FR EL UK  AT BE DE ES IE  IT SE PT DK  FI  NL Others  
26  14  9  9  5  5  4  4  4  4  4  2  1  1  1  4  
26.8%  14.4%  9.3%  9.3%  5.2%  5.2%  4.1%  4.1%  4.1%  4.1%  4.1%  2.1%  1.0%  1.0%  1.0%  4.1%  
                                                 
17 Some contributors (bank managers) did mention “natural person” as their field of activity (due to a 
misunderstanding on the meaning of the question concerned, which was not referring to a particular status 
of the natural person responsible for the depositary business within the depositary institution). Due to this and other slightly erratic answers, data had to be repr ocessed for statistical treatme nt of aggregated answers. 
 
 21    4. Some of the main lessons drawn from the contributions made by Member States' 
authorities: 
4.1. Concentration varies –and cases of branch-depositaries remain limited: 
 Cases where the 
depositary has his 
registered office  
in the Member 
State where the UCITS was authorised Cases where the 
depositary only has a branch in that 
Member State  Overall assets of 
UCITS authorised in that Member State, in billion euros * 
p.m: Overall assets 
of investment funds 
(UCITS and non-
UCITS) authorised in that Member State, in billion euros * 
BE 13 2 71.5 77.2 
DK  15 2 38.3 38.3 
DE +/- 80 2 199.5 751.0 
EL  15 none  25.4 27.1 
ES 118 5 170.8 172.9 
FR  87 none 805.9 889.3 
IE  23 5 238.5 303.9 
IT  48 2 360.7 371.0 
LU  65 6 766.5 844.5 
NL  0** none  10.0*** 106.3 
AT 22 1 63.8 85.3 
PT  17 1 19.0 24.5 
FI  12 2 15.7 17.7 
SE  < 10 1 55.3 56.1 
UK  7 none 275.5 370.2 
TOTAL  +/- 530 +/- 30 3,116.4 4,133 
* FEFSI data covering the situation at the end of  Dec. 2002 (except NL: at the end of Dec. 2001). 
The data (UCITS + non-UCITS) are provided as a me re illustration of the relative importance of 
UCITS' assets at national level. It is importa nt to note that the end-2002 figures reflect, in 
particular, the impact of the bear market fo r stocks, depending on the importance of UCITS' 
investments in equities (which varies  significantly across Member States). 
** The UCITS authorised in The Netherlands are al l listed investment companies, which are not 
subject to the requirement to have a depositary: th is is an option left to Member States' discretion 
by Article 14(5) of Directive 85/ 611/EEC, --subject to some lim itations on grounds of investor 
protection. 
*** End-2002 estimate (source: Dutch FMA) 
 
 22    4.2. Current typology of eligible  institutions and preferred  possible future typology:  
 Regulators’ preferred target 
typology :  Current regulation ( with an indication of specific 
minimum capital requirements, where relevant):  
BE Credit institutions and investment firms, 
both subject to additional organizational and capital requirements; Central Bank  Credit institutions, investment firms, public institutions 
(e.g. Central Bank) 
DK  Credit institutions only Credit institutions 
DE Credit institutions only Credit institutions 
EL  Supervised institutions in general Credit institutions 
ES Institutions subject to prudential supervision by the central Bank or the Financial Markets Authority  Credit institutions, investment firms 
FR Supervised institutions in general Credit institutions, investment firms, insurance 
undertakings, public instituti ons (e.g. Central Bank); min 
capital requirement: 3.8 million euros 
IE  Supervised institutions in general Certain cred it institutions (min. cap. 6.35 million euros) 
+ wholly-owned subsidiaries of credit institutions (incl. 
those of equivalent institutions  in third countries) subject 
to "financial resource requirements" of at least 125,000 euros (or one year's fixed overheads), incl. by means of a subordinated loan assessed by supervisory authorities  
IT ____  Credit institutions (min. cap. 100 million euros)  
LU ____  Credit institutions (min. cap. 8.7 million euros, including 
6.2 million euros of paid-up share capital)  
NL  No restriction to specific categories (insofar as the activities of securities safekeeping and administration on account of third-parties are subject to 
supervision)  Credit institutions + other categories (securities 
administration firms, certain trusts, independent firms); 
min. cap. 113,445 euros  
AT Credit institutions only Credit institutions 
PT Credit institutions only Credit institutions (min. cap. 7.5 million euros)  
FI  Supervised institutions in general Credit ins titutions, investment firms, other regulated 
legal persons  
SE Credit institutions only Credit institutions  
UK Supervised institutions in general Credit institutions, investment firms, insurance 
undertakings, other regulated legal persons; min. cap. 
£ 4 million. 
 
 23    4.3. On the basis of a list of 13 functions id entified in the consultation, possible de legations by the management company to t he depositary:  
Shaded box : functions identified as eligible for possible delegation to the depositary  in a given Member state 
 Unit issue 
and 
redemption marketing  Valuation 
and pricing 
(incl. tax 
returns) Legal and 
fund 
manag.mt 
accoun-
ting 
services Customer 
enquiries Regulatory 
compliance 
monitoring Mainte-
nance of unit-
holder 
register Distribu-
tion of 
income Record 
keeping Contract 
settlement 
(incl. 
certificate 
dispatch Invest-
ment 
mana-
gement Internal 
control 
Funct-
ions  Risk-
manage-
ment 
proce-
dures Precondi-
tions / 
other 
functions 
DK                
DE Depositary  (ascribable to 
the depositary 
by contract, 
not by a delegation)    Depositary          
EL               
ES shared  shared       shared   shared      
FR               
IE                
IT Depositary       Depositary  Depositary      
LU               
NL               
AT               
PT               
FI                
SE                
NB: BE and UK did not supply any de tailed answer to this question. 
"Depositary": function considered as being immediately under the depositary's responsibility; "s hared": function for which the responsibility is shared between the trust company and the depositary, 
depending on the precise tasks that it covers. 
Furthermore, pursuant to Directive 2001/107/EC, Member States may also allow UCITS mana gement companies to provide the followin g "non-core service": safekeepi ng and administration in relation 
to units of collective investment undertakings – which could modi fy the allocation of tasks betw een depositary and management c ompanies in some jurisdictions 
 
 24    5. Some further comments related to di fferences in the depositary's legal 
frameworks: 
5.1 Prudential issues related to the in terpretation of 'asset safekeeping' 
5.1.1 Limitations to the de positary's liability: 
The issue is whether or not the depositary is really  subject to an obligation to return the assets 
in any events (except limited cas es of "Acts of God" or really exceptional circumstances left 
to the court's appraisal). When other lega l or contractual limitations are accepted, the 
depositary tends to assume a role of sub-custodia ns' controller, i.e. it may be able to waive its 
liability even in the event of bankruptcy or frau d of a sub-custodian provided it can prove it 
exerted controls with "reasonable diligence".  
5.1.2 Prudential concerns on the link between depositary, sub-custodian and UCITS: 
Even as a prime custodian, the depositary may en trust assets to sub-custodians, or even to a 
single global sub-custodian, whos e network will handle for it the relationships with each 
country-specific central depositary (CSD). The depositary will then concentrate its 
counterparty risk on one partner institution: this  possibility is admitte d in at least nine 
Member States. Another type of relation, admitted in at least thre e Member States, consists in 
the direct opening of an account by the UCITS w ith a sub-custodian. This situation raises 
specific prudential issues in terms of effectiveness of depositary oversight. 
5.2 Impact of the distinction between obli gation of means and obligation of result: 
Depending on the Member State, th e depositary may be subject to an obligation of result, or 
an obligation of means, in th e performance of its prudential duties. For instance, to " ensure 
that the value of units is calculated in accordance with the law and the fund rules " may 
translate into two dramatica lly different levels of res ponsibility and computer-technology 
investments: the depositary may either have  to control the calculation methods (through 
sample-checks and credibility te sts based on indices) or be subj ect to a duty to achieve the 
same result (with a systematic recalculation of positions).  
5.3 Some examples of sources of conflict s of interest and existing regulatory 
safeguards: 
5.3.1 Cash deposits: 
Cash deposits by a UCITS with its depositar y are common market practice. One UCITS 
competent authority reportedly uncovered, thro ugh on-site inspection of the depositary, the 
existence of unfair contracts, where the UC ITS was remunerated below market conditions. 
5.3.2 Sharing of registered office between depositary and management company: 
Only a minority of Member States seem to ha ve included in their re gulations a ban on the 
depositary and the management company sharing the same registered office: prevention of a 
major conflict of interest would then rest on the requirements and "unwritten" prohibitions 
directly imposed by supervisors.  
 
 25    5.3.3 Some further comments on the matrix of delegation possibilities provided under 
point 4.3 of this Annex: 
Based on the replies of competent authorities, it  seems that in at least one Member State, a 
management company could delegate all its task s, except for internal controls (but including 
risk-management procedures); in four other Me mber States, it may delegate 7 to 10 of the 
functions concerned. Except for risk-management , all other tasks were mentioned by at least 
two regulators as eligible for such delegation (including internal controls and investment 
management)18.  
                                                 
18 Furthermore, the lead responsibility for a given task ma y sometimes be allotted alternatively, depending on the 
Member State, to the management company or the depositary  (but with the further possibility of delegation to the 
other, depending on regulatory and contractual provisions).