EUROPE: EFAMA Defends UCITS Brand Following Madoff

Thursday January 15 2009

The European Fund and Asset Management Association (EFAMA) has today advocated its support for the UCITS brand.

EFAMA is monitoring the fallout from the Madoff scandal and legitimate questions being asked about the UCITS funds that had served as bridges between Mr Madoff and certain end-investors. EFAMA maintains the necessity to carry out a detailed analysis on the responsibilities of all European parties to maintain investor confidence in the UCITS fund and stresses that the main responsibility of the alleged fraud remains with the US. EFAMA also advise that the UCITS Directive provides extensive investor protection mechanisms.

In defending the UCITS brand, EFAMA now call for immediate resolution of the cases under investigation in other member countries and calls upon CESR to enforce European regulation consistently regarding these duties.

For further information please click on the above link.

Funds-Axis comment:

Given that global custodians pride themselves on the strength of their sub-custodian network, Funds-Axis remain puzzled as to why a UCITS custodian would ever sub-delegate custody to a Madoff-entity or similar. We are clearly missing something here and any thoughts would be appreciated.

Furthermore, should UCITS now be going back to their Custodian’s and asking for further detail of the sub-custody networks in place and seeking written assurance that the custodian assumes full responsibility for the default of any sub-custodian? Would any Custodian give such an undertaking?