Commission clarifies boundaries of Custodians’ duties

In its efforts to provide greater regulatory clarity for industry, the Commission has today published new guidance aimed at providing additional clarification about Designated Custodians’ duties.

This guidance sets out the standards of conduct that are expected of Designated Custodians when they act for Open-Ended Collective Investment Schemes and where the assets are held indirectly, for example, where assets are held in a separate legal structure. The guidance presents different ways of complying with the current Rules although a Designated Custodian may also adopt other appropriate and effective measures to those contained in the guidance as long as it can demonstrate that such measures achieve compliance with the Rules.

The Commission has also highlighted within the guidance, taking into account the findings of the Bailiwick’s National Risk Assessment, that in order to mitigate the risk of a Scheme itself being used for criminal purposes, the expectation is that the Designated Custodian should be able to demonstrate knowledge of the underlying assets of the Scheme and the guidance also presents ways of doing this. Designated Custodians should also be cognisant of their obligations to perform ongoing and effective monitoring of transactions and other activity.