A number of banks in the financial centre offer custody services to investment funds. The latter are required by the European Directive on collective investment schemes, and by Luxembourg law in the matter, to entrust the custody of their assets to a custodian bank. Luxembourg law stipulates that the custodian must be a bank in the sense of the law of 5 April 1993 on the financial sector, as amended.
The depositary bank has the dual mission of safeguarding the assets of the collective investment scheme and monitoring the legality of certain activities by the fund or its management company.
Common Investment Fund
If the fund is constituted as a common investment fund (fonds commun de placement - FCP), the administrative responsibilities of the depositary bank are wider. They include day to day portfolio administration (such as the cashing in of dividends, coupons and matured bonds, the exercise of option rights and other operations linked to the securities and liquid assets held in the portfolio), verification that the calculation of the net asset value is carried out in compliance with the law and the management policy and monitoring that instructions coming from the fund manager are in line with the law and the fund prospectus.