CESR has responded to the Commission’s consultation on the UCITS depositary function. It explains the exercise it carried out in the wake of Madoff to see how various Member States applied rules on depositaries and the advice CESR planned to provide to the Commission. The response addresses the Commission’s questions, but broadly points out:  

  • CESR members do not think there should be a distinction in depository liability depending on whether the fund is a retail or professional fund;  
  • it is crucial to find a solution as it is not acceptable for some Member States to consider retail investors should bear no risk while others think sometimes depositaries should not be liable for sub-custodian default, although its members are divided on what the solution should be;  
  • the need for more clarity, certainty and harmonisation should drive the process forward.