The role, responsability and liability of custodians in the funds industry : a legal analysis

Abstract

The study carried out in this thesis seeks to make important observations on the function and purpose of custodians within the funds industry. By means of a legal analysis on the operation and liability frameworks of the custody service, the thesis seeks to determine the role, responsibility and liability of custodians in the industry, and the development of this sector in accordance with the unparalleled regulatory changes being faced by custodians as fuelled by the ongoing European economic crises and the financial failures of the last few years.. On this premise, the thesis seeks to address the issue whether regulation is the only alternative, and whether more regulation will reduce the risk of future failures. Specific emphasis on the legal aspects in terms of European Directives and Maltese legislation pertaining to custodians is undertaken throughout. The regulatory frameworks, namely the UCITS and AIFM directives, are focused on as the significant pieces concerning the role, responsibility and liability of custodians. The roots of custody under Maltese legislation are analysed in terms of the provisions found under the Civil Code and principally as an investment service to the funds industry under the Investment Services Act (Control of Assets) Regulations. In attempting to determine the function, obligations and the liability standards of custodians as one of the key service providers to the funds industry, the thesis also discusses the legal, economic, political and social environment within which custodians operate.