SAFEKEEPING OF FUND ASSETS

A Private Fund shall appoint a custodian to:

• hold in custody in segregated accounts opened in the name, or for the account, of the private fund, the custodial fund assets; and
• verify, based on information provided by the private fund and available external information, that the private fund holds title to any other fund assets and maintain a record of those other fund assets.

A Private Fund shall not be required to appoint a custodian if it has notified CIMA and it is neither practical nor proportionate to do so, with regard to the nature of the private fund and the type of assets it holds.
If the private fund is not appointing a custodian, then title verification must be carried out by

• an administrator or another independent third party; or
• the manager or operator, or a person with a control relationship with the manager of the private fund, provided that —
  • the title verification function is independent from the portfolio management function; or
  • potential conflicts of interest are properly identified and disclosed to the investors of the private fund.

HOW CAN DMS ASSIST PRIVATE FUND MANAGERS?

The most logical service providers for this function would be the banking institution or, in certain cases, the administrator that the Private Fund retains. This would allay any independence concerns and the function already aligns with the operational and regulatory requirements of a fund custodian.

As per DMS’ interpretation of the legislation, DMS Bank is providing this service as an extension of its existing banking and custodial service offerings. DMS Bank will:

• Create a segregated account in the name of the fund to custody its assets via a correspondent relationship with State Street Global
• Provide title verification of assets for the Private Fund
• Maintain custodian records of purchases, sales etc for all custodied assets.
• Provide secure access to all custody data via customized portal.