When discussing the duties of the ASI depositary, the First, indicate that, in accordance with the Investment Funds Act and the management of alternative investment funds, ASI, which is only subject to an entry in the ASI management register, is not required to have a depositary.
The obligation to establish a depositary on the basis of a written agreement for the exercise of the functions of a depositary shall lie with the manager acting on the basis of an authorisation of the KNF for each managed ASI.
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Alternative Investment Companies (ASI) in practice – investment management and capital raising. Practical workshops
Entities performing depositary functions
Under the Fund Act, an ASI Depositary Agreement may be concluded only with:
- 1) a national bank;
- 2) a branch of a credit institution established in the territory of the Republic of Poland;
- 3) an investment company, if its initial capital is at least equivalent to 730,000 EUR;
- 4) the National Stock Deposit of the Company;
5) a prime broker acting as a counterparty of a company where:
- • (a) it shall separate from the performance of its functions as prime broker from its organisational and technical functions; and
- • (b) it shall ensure that conflicts of interest are properly identified and monitored and managed and that ASI investors are informed of the identified cases of such conflict.
Basic duties of the depositary
Obligations of the depositary under the ASI Depositary Agreement, taking into account the provisions Regulation (EU) 231/2013, include:
- 1) storage of ASI assets;
- 2) keep a register of all ASI assets;
- 3) ensure that ASI’s cash is stored in cash accounts and bank accounts held by entities authorised to hold such accounts in accordance with or in compliance with Polish law as required by or equivalent to Community law;
- 4) ensure proper monitoring of the cash flow of ASI;
- 5) ensure that ASIs are placed on the market and redeemed in accordance with ASI's internal rules and regulations;
- 6) ensuring that the clearing of asset contracts and the ASI takes place without undue delay, and verifying the timely settlement of ASI contracts;
- 7) ensure that the net asset value and the value of the ASI’s right of participation are calculated in accordance with the laws and internal regulations of the ASI;
- 8) ensure that ASI's revenue is used in a manner consistent with the ASI's rules and internal regulations;
- 9) the execution of ASI and ASI management orders, unless they are contrary to ASI's law or internal regulations;
- 10) verification of compliance of the ASI with the laws or internal regulations of the ASI to an extent other than those resulting from point 5-8 and taking into account the interests of investors.
The Depositary shall ensure that ASI and ASI’s internal management regulations and those of ASI and ASI’s management are complied with in accordance with the law and internal regulations of the Fund Act, at least by continuous control of the actual and legal activities carried out by the alternative investment company and ASI’s management, and by overseeing the compliance of those activities with ASI’s internal law and regulations and with ASI’s internal management regulations.
Liability of the depositary
The Depositary shall be liable for damages caused by the failure to perform or inadequately perform the obligations set out in the Fund Act. The depository is primarily responsible to ASI for the loss of the financial instruments that are assets of that company.
It should be stressed that the liability of the depositary cannot be excluded or limited in the ASI depositary contract. In the event of the loss of certain financial instruments constituting ASI's assets, the depositary shall immediately reimburse the same financial instrument or the same asset or amount corresponding to the value of the lost financial instrument or asset to that company.
It is worth pointing out that the depositary may waive liability if it demonstrates, taking into account Article 101 Regulation (EU) 231/2013, that the loss of a financial instrument or of an alternative investment company's assets occurred for reasons beyond its control. In the event of damage to the depositary, The ASI manager is obliged to obtain claims from the ASI depositary arising from the failure or inadequate performance of the depositary’s contract to perform the functions of the depositary of an alternative investment company.
Author: Maciej Tuszyński
Legal Manager in the Legal Department. Lawyer, member of the District Bar Council in Warsaw, graduate of the Faculty of Law and Administration of the University of Warsaw. He specializes in commercial and civil law law. He has professional experience, which includes litigation and comprehensive legal advice on the day-to-day service of economic operators, in particular commercial law companies. As part of his work at the law firm, his practice focuses on corporate, civil and economic matters.