Swedish regulator demands formal manager/custodian split in Ucits V

Finansinspektionen, the Swedish Financial Supervisory Authority, says in a response to the country’s Ministry of Finance regarding development of the so-called Ucits V Directive that it welcomes proposals by the European Commission to more closely regulate custodians, and apply compensation rules and sanctions in the area of funds.

FI said that the new rules should be developed in a similar way as other Directives in the area of financial services, unless there is a pressing reason why they should be implemented differently.

It added that where custodians are concerned, it feels that there should be a requirement for independence and a minimum acceptable level of frequency of controls, and that it should be clear which assets that a securities fund may invest in and which assets a custodian manages.

The Authority notes that it previously raised the issue of financial groups owning both asset manager and custody businesses, in its response of early 2011 to the EC.

“The proposals that the Commission have now delivered do not contain any ban against custodians and fund companies belonging to the same group,” FI said.

“Finansinspektionen believes that the conflicts of interest that can arise in such situations make it difficult for custodians to act independently and in the interests of shareholders. Finansinspektionen has through its oversight visits seen that custodians tend to treat fund companies and funds in the same group differently than external fund companies and funds. This is of course unacceptable from an investor perspective and it is therefore desirable for such a ban to be introduced through the Directive.”


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