Article 30: Custody of Fund Assets and Related Documents

Article 30: Custody of Fund Assets and Related Documents

a) The custody of the fund assets shall be held by one or more custodians in the Kingdom pursuant to a written contract, who shall be a capital market institution authorised to conduct custody activity.

b) A custodian may appoint one or more third parties or affiliates as a fund sub-custodian for any real estate investment fund, pursuant to a contract in writing, to take custody of the fund's assets. The remuneration of the fund sub-custodian shall be paid by the custodian out of its own resources and the fund sub-custodian must be a capital market institution authorised to conduct custody activity.

c) With exception of paragraph (b), a fund sub-custodian may be appointed from out of the Kingdom to conduct custody of the fund's foreign investments, and must be appointed pursuant to a contract in writing and shall be established, authorised and supervised in a jurisdiction that employs regulatory standards and requirements at least equivalent to those of the Authority.

d) The custodian appointed pursuant to paragraphs (a), (b) or (c) of this Article must not be a fund manager or a fund sub-manager to the relevant fund, or an affiliate of the fund manager or to the fund sub-manager.

e) The custodian must segregate each real estate investment fund’s assets from its own assets and from the assets of its other clients, and must separately identify, by registration in the name of the custodian for the benefit of the relevant real estate investment fund the securities and other assets of such investment fund. The custodian must register the real estate assets of the fund and the ownerships in companies unlisted and not deposited at the depositary centre in the name of a fully owned company of the custodian.

f) With exception of paragraph (e) of this Article, in case the real estate investment fund takes the form of a special purposes entity, the custodian must segregate each real estate investment fund’s assets from its own assets and from the assets of its other clients. Such assets must be specified independently by registering the securities and other assets in the name of the special purposes entity. The custodian must also maintain all necessary records and other documents that support the performance of its contractual obligations.

g) All related documents and records to the Fund must be maintained by the custodian, which includes, for example, the following documents:

a. Title of deed.

b. Investment decisions.

c. All material contracts related to the operation of the Fund.

d. Fund Board minutes of meeting.

e. Accredited Valuers’ reports.

h) The custodian shall be fully responsible for its obligations in accordance with the provisions of these Regulations, weather the custodian carries out its duties on its own or assign it to a third party in accordance with the provisions of these Regulations or the Capital Market Institutions Regulations. The custodian shall be liable towards the fund manager and the unitholders for losses incurred by the investment fund, which are caused by fraud, negligence, misconduct or willful default of the custodian.

i) The custodian is responsible for maintaining and protecting the real estate investment fund assets for the benefit of unitholders, through a policy established by the fund manager in this regard.

j) The net assets of the Fund shall be owned collectively by the Unitholders in such fund. A fund manager, or custodian shall not have any interest in or claims against such assets, other than when the Fund Manager is a Unitholder, or for claims permitted under these regulations and disclosed in the Fund’s Terms and Conditions.

k) With the exception of fund units owned by the Fund Manager, fund sub-manager, custodian, sub-custodian, investment advisor, or distributor, and within the limits of what is owned by the debtor, Creditors of such fund manager, fund sub-manager, custodian, sub-custodian, investment advisor, or distributor may not have any right to claim or entitlements to money or assets of the investment fund.

l) Real estate assets of the real estate investment fund can be mortgaged to a subsidiary of an entity licensed to provide loans, that extended a loan for the fund.