S.L. 370.5 Art. 8Deposit of customer instruments with third parties.

(1) A subject person may deposit instruments held by it on behalf of its customers into an account or accounts opened with a third party.

(2) The subject person shall exercise all due skill, care and diligence in the selection, appointment and periodic review of the third party and of the arrangements for the holding and safekeeping of those instruments.

(3) The subject person shall, in particular, take into account the expertise and market reputation of the third party as well as any legal requirements or market practices related to the holding of instruments that could adversely affect the rights of its clients.

(4) Where the subject person proposes to deposit customer instruments with a third party, the subject person shall only deposit instruments with a third party in a jurisdiction where the safekeeping of instruments for the account of another person is subject to specific regulation and supervision and that third party is subject to this specific regulation and supervision.

(5) The subject person shall not deposit financial instruments held on behalf of customers with a third party in any jurisdiction that does not regulate the holding and safekeeping of instruments for the account of another person unless one of the following conditions is met:

(a) the nature of the instruments or of the investment services connected with those instruments requires them to be deposited with a third party in that third country; or

(b) the instruments are held on behalf of a professional client and that professional client requests the subject person, in writing, to deposit them with a third party in that third country.

(6) The provisions of sub-regulations (4) and (5) shall also apply when the third party has delegated any of its functions concerning the holding and safekeeping of instruments to another third party.