Trustee / Custodial Services
Both the UCITS and Non UCITS Guidance Notes issued by the Central Bank state that the assets of either a unit trust, investment company or investment limited partnership must be entrusted to a trustee for safe keeping.
The trustee function includes the custodian function. (A point of interest is that the notices make no distinction between the role of the custodian and of the trustee regardless of the investment vehicle concerned).
The regulations describe the eligibility criteria to act as as a trustee in the Irish market in terms of ownership, minimum levels of capitalisation, expected levels of competence and expertise.
There are certain practical distinctions between the custodian’s operational responsibilities and the fiduciary obligations they assume under the regulations. In a pure operational sense, a custodian generally provides some or all of the following services:
- asset safekeeping;
- security settlement;
- income collection;
- corporate action processing;
- cash management; and
- securities lending.
In providing these services under the regulations, the trustee/custodian also automatically assumes the following responsibilities to:
Ensure that units are issued in accordance with the funds constitutional documentation and regulations
Ensure that the NAV is calculated in accordance with the funds constitutional documentation and regulations
Carry out the instructions of the manager/investment company unless they conflict with the funds constitutional documentation and regulations
Ensure that income is remitted to the fund on timely basis and is appropriately applied
Enquire into the conduct of the manager/investment company in each accounting period and report as to whether the fund has been managed in accordance with funds constitutional documentation and regulations.
The trustee/custodian cannot be the same legal entity as the administrator to a fund. As a result service providers are established as either administration companies or custodians, many companies operate under both.
There are currently 23 custodians operating in the Irish market.
