Custody & Trustee Services

DCCL’s primary role is to acts as a Custodian & Trustee for the Collective Investment Schemes, Pension Funds, Private Funds and Specially Managed Accounts under the ambit of its registration/Licence with SECP. DCCL is also providing the its services for other special categories of Collective Investment Schemes, including REIT Schemes, Exchange Traded Funds (ETFs) and Private Equity Funds.

Appointment of Trustees

As per the NBFC regulations, an Asset Management Company (AMC), is required to appoint a registered Trustee before its application for the registration of an Open-End Scheme or Closed End Scheme. An AMC is forbidden to issue any units or certificates of an Open-End Scheme or Closed-End Scheme to the public unless the scheme is registered as a Notified Entity with the Commission and a Trustee or a Custodian is not appointed by it.

Once appointed by an AMC and approved by the Commission, a Trustee Company becomes responsible to take under its control all the property of the Open-End Scheme or Closed End Scheme and hold the same in trust for the unit or certificate holders in accordance with the Rules, Regulations and the provisions of the Constitutive Documents. All cash and registerable assets are also required to be registered in the name of, or to the order of, the Trustee. In this manner, DCCL becomes responsible for protecting the interests of the unit or certificate holders in terms of the constitutive documents.

Broader Services by Custodians/Trustees

• • Taking ownership of the funds’ assets
• • Acting as watchdog to ensure compliance with the regulatory and constitutive document requirements
• • Carrying out settlement of investments on behalf of funds in equity, debt, money, and commodity products
• • Facilitating unit or certificate holders or investors with regards to the issuance and redemption of their investment units or certificates
• • Issuing periodical Trustee Reports for the investors

Obligations of Trustees

Under Regulation 41 of the Non-Banking Finance Companies and Notified Entities Regulations, 2008, a Trustee is required to:

1. take under its control all the property of the Open-End Scheme or Closed-End Scheme and hold it in trust for the unit or certificate holders in accordance with the Rules, Regulations and the provisions of the Constitutive Documents and the cash and registerable assets shall be registered in the name of, or to the order of, the trustee;
2. be liable for any loss caused due to its wilful acts or omissions or that of its agents in relation to any custody of assets or investment forming part of the property of the Open-End Scheme or Closed End Scheme;
3. ensure that the sale, purchase, issue and transfer of units or certificates affected by the Open-End Scheme or Closed End Scheme are carried out in accordance with the provisions of the Constitutive Documents;
4. ensure that repurchase, redemption and cancellation of units are carried out in accordance with the provisions of the Constitutive Documents;
5. carry out the instructions of the Asset Management Company, in respect of investments unless they are in conflict with the provisions of these Regulations or the Constitutive Documents;
6. ensure that the investment and borrowing limitations set out in the Regulations and constitutive documents are duly are complied with;
7. ensure that the conditions under which the Open-End Scheme or Closed End Scheme has been registered are complied with;
8. issue a report to be included in the annual and second quarter report of the Collective Investment Scheme and therein state whether, in its opinion, the Asset Management Company has in all material respects managed the Open End Scheme or Closed End Scheme in accordance with the provisions of the Constitutive Documents, the Rules and these Regulations, and if the Asset Management Company has not done so, the respects in which it has not done so and the steps that the trustee has taken in respect thereof;
9. deleted
10. ensure that the Asset Management Company has been diligent in appointing brokers to avoid undue concentration of business with any broker;
11. ensure that units of an Open-End Scheme have been issued after realisation of subscription money;
12. ensure that the methodology and procedures adopted by the Asset Management Company in calculating the value of units are adequate and the pricing and valuation for sale, issue, repurchase, redemption and cancellation are carried out in accordance with the provisions of the Constitutive Documents and regulatory requirements;
13. immediately inform the Commission if any action of the Asset Management Company 147[in relation to and on behalf of collective investment scheme] contravenes the Ordinance, the Rules, these Regulations, Constitutive Documents, guidelines, codes, circulars, directives or any other applicable laws148 [along with details of remedial action taken by the trustee where applicable;]
14. comply with the directions of the Commission given in the interest of the unit holders or certificate holders
15. arrange for its annual system audit by an auditor and provide the report of such audit to the Commission and the concerned Asset Management Company, within four months of the close of the financial year of the trustee;
16. within three months of the close of its financial year pay an annual fee to the Commission at the rate of 0.005 per cent of average annual net assets of Open-End Scheme or Closed-End Scheme under its trusteeship and also furnish a copy of its annual audited accounts to the Commission;
17. call a meeting of the unit holders in such manner specified by the Commission through circular:
1. whenever required to do so by the Commission in the interest of the unit holders; or
2. whenever required to do so as per the requirements of these Regulations; and for this purpose, the following requirements shall be ensured by the trustee for convening the meeting of unit holders:
1. notice of the meeting indicating time, place and purpose of the meeting shall be given to every unit holder of the Collective Investment Scheme at least seven working days prior to the meeting;
2. in case of meeting called for any specific purpose, statement of material facts and other pertinent information/documents shall be made available to the unit holders;
3. trustee of the Collective Investment Scheme shall attend every meeting of the unit holders and shall act as secretary to such meeting;
4. any resolution passed or consented in writing by the majority of unit holders representing at least three fourths in value of the total outstanding units of the Collective Investment Scheme shall become binding except such resolution is contrary to the Rules, Regulations, Constitutive Documents or circulars and directives issued by the Commission; and
5. the trustee shall submit minutes of the meeting along with any resolution passed in the meeting to the Commission within seven working days of the meeting;
18. not invest or redeem units of Open-End Schemes for which it acts as trustee in the cases where there is a likelihood of a change in investment objective of the scheme or there is a likelihood of change in account policy or a significant change in the valuation of any asset or class of asset and the same has not been communicated to the inventors;
19. obtain and maintain duplicate of all the records of register of unit holders maintained by the Asset Management Company or the Registrar and shall update the record on a fortnightly basis.