8.1. Application

This chapter applies to:

• (a) all Domestic Fund Managers in respect of all Non-Exempt Funds and Real Estate Investment Trusts managed by those Fund Managers; and
• (b) all Foreign Fund Managers that manage an Exempt Fund.

8.2. Requirement for Eligible Custodian and Fund Administrator

1. (a) A Fund to which this chapter applies must have an Eligible Custodian and a Fund Administrator, in both cases acceptable to the AFSA. This is subject to the exception to appoint an Eligible Custodian contained in Rule 8.2(b) and Rule 8.2(e).
2. (b) A Fund Manager is not required to appoint an Eligible Custodian where, due to the nature of the Fund and the type of assets which it holds, it is neither practical nor proportionate to appoint an Eligible Custodian, in which case the Fund Manager may choose not to appoint an Eligible Custodian, provided that title to such assets is either registered in the name of the Fund or is registered in the name of a nominee company (provided that in this latter case (i) such nominee company declares that it holds title to such assets on trust for the Fund; and (ii) the Fund Manager, vis‐à‐vis the Fund, takes full responsibility for the acts and omission of such nominee company).
3. (c) A Fund Manager of a Fund to which this chapter applies must use appropriate care, skill and diligence when appointing an Eligible Custodian or Administrator. In conducting its due diligence, at a minimum, the Fund Manager must consider the Eligible Custodian's or Administrator's legal and regulatory status, financial resources and organisational capabilities.
4. (d) A Fund Manager must monitor the Eligible Custodian and Administrator on an on-going basis for compliance with the terms of the custody agreement and administration agreement for the relevant Fund.
5. (e) The AFSA may waive the requirement to appoint an Eligible Custodian or Administrator on a case-by-case basis on application by the Fund Manager of the relevant Fund.

8.3. Eligible Custodian

For the purposes of these Rules, an Eligible Custodian is a Person who is a separate legal entity from the Fund Manager for the relevant Fund and who also meets one of the following criteria:

• (a) an Authorised Person whose Financial Services Permission authorises it to Provide Custody Services; or
• (b) an Authorised Person that is a Bank; or
• (c) a legal entity that is authorised and supervised by a Financial Services Regulator in a Recognised Jurisdiction for providing custody services in respect of a Fund; or
• (d) any other legal entity otherwise acceptable to the AFSA.

8.4. Contents of a custody agreement

A custody agreement with an Eligible Custodian in respect of a Fund must:

• (a) require that the title of any account of the Eligible Custodian to hold Fund property sufficiently distinguishes that account from any account containing Investments belonging to the Eligible Custodian, and is in the form requested by the Fund Manager; and
• (b) require that the Fund's property will only be credited and withdrawn in accordance with the instructions of the Fund Manager; and
• (c) require that the Eligible Custodian will hold the Fund's property separately from assets belonging to the Eligible Custodian; and
• (d) set out the arrangements for recording and registering the Fund's property, claiming and receiving dividends and other entitlements and interest and the giving and receiving of instructions; and
• (e) not permit the delegation of the activities and functions of the Eligible Custodian without the prior written consent of the Fund Manager; and
• (f) require the Eligible Custodian to deliver a statement to the Fund Manager (including the frequency of such statement), which details the Fund's Investments deposited to the account;
• (g) require that all the Investments standing to the credit of the account are held by the Eligible Custodian as the agent of the Fund Manager or the Fund and the Eligible Custodian is not entitled to combine the account with any other account or to exercise any charge, mortgage, lien, right of set‐off or counterclaim against Investments in that account in respect of any sum owed to the Eligible Custodian on any other account of the Fund Manager, the Fund or any other Person; and
• (h) detail the extent of liability of the Eligible Custodian in the event of default.

8.5. Functions of an Administrator

(a) The AML module applies to an Administrator of a Fund in respect of its activities regarding that Fund as if each reference in AML to a "customer" is a reference to a "Unitholder" or "prospective Unitholder" as appropriate to the context.

(b) An Administrator of a Fund must not hold or control monies or assets belonging to third parties in connection with such administration except in the following circumstances:

1. (i) holding cheques to the order of a Fund's bank account, provided such cheques are securely held for a maximum of three business days prior to being deposited into the relevant Fund's bank account or returned to the drawer of the cheque; or
2. (ii) where a mandate over a Fund's or other third party's bank account is granted to the Administrator and the mandate has been agreed in writing with the bank concerned, and transfers out of the relevant bank account may be made only in circumstances where the mandate restricts instructions to make such payments to being made solely in accordance with the payment of invoiced fees and expenses, made in accordance with the relevant Fund's Constitution or Offering Materials and are not remitted to the account of the Administrator except by express instructions of the Fund Manager.

(c) An Administrator of a Fund must maintain records which are sufficient to show and explain transactions in relation to each of the specific activities and functions which are being provided to each Fund, in respect of Unitholders or potential Unitholders of the Fund as appropriate. The records must be retained by the Administrator for at least 6 years from the date to which they relate and at all reasonable times, open to inspection by the Fund Manager, the Fund's auditor and the AFSA and, if requested by the AFSA, be capable of reproduction within a reasonable period not exceeding 3 days, in hard copy and in English.

8.6. Contents of an administration agreement

An administration agreement with an Administrator in respect of a Fund must:

• (a) set out the functions and service standards that will be applied to the provision of the administration of the Fund; and
• (b) must not permit the delegation of the activities and functions of the Administrator without the prior written consent of the Fund Manager; and
• (c) require the Fund Administrator to retain any relevant work or records relating to its activities and functions where the contract is terminated either by the Fund Manager or the Administrator.

8.7. Requirements for notification

The AFSA must be notified when a Person ceases to be an Administrator or Eligible Custodian, and any Offering Materials must be updated accordingly.