A depositary plays an important role within an investment fund structure, contributing to the safekeeping of assets and the proper functioning of fund operations. In Malta, investment funds are generally required to appoint a depositary, or maintain equivalent safekeeping arrangements, depending on the applicable regulatory framework.

The depositary's responsibilities extend beyond custody and typically include three core functions:

• Safekeeping of assets through the custody of financial instruments and verification of ownership of assets that cannot be held in custody;
• Cash flow monitoring to ensure that subscriptions, redemptions and other cash movements are properly recorded and reconciled; and
• Oversight duties, including monitoring the calculation of the fund's net asset value, settlement of transactions and compliance with the fund's investment restrictions.

The scope of a depositary's responsibilities varies according to the type of fund.

For UCITS, which are primarily aimed at retail investors, the regulatory framework imposes stringent obligations on the depositary. In particular, the depositary is generally subject to a strict liability regime for financial instruments held in custody, reflecting the high level of investor protection applicable to these funds.

For Alternative Investment Funds (AIFs) and Notified Alternative Investment Funds (NAIFs), the depositary performs similar safekeeping functions in relation to financial instruments held in custody. For other assets, such as real estate or private company shares, the depositary's role focuses on ownership verification and record keeping.

For Professional Investor Funds (PIFs) and Notified Professional Investor Funds (NPIFs), which target professional and institutional investors, the depositary's role is generally more limited and focused primarily on safekeeping arrangements.

At European level, depositary services have traditionally been provided within the fund's home jurisdiction. Recent amendments introduced through AIFMD II have created a limited framework allowing AIFs, under specific conditions, to appoint a depositary established in another Member State where suitable services may not be available locally.

These developments have brought renewed attention to the concept of greater cross-border access to depositary services. For smaller jurisdictions, such developments may support broader access to specialised expertise, increased competition and greater diversity of service providers, while maintaining appropriate investor protection safeguards.

As a key participant in the investment fund ecosystem, the depositary continues to play an important role in safeguarding assets and supporting market confidence. Ongoing developments at European level are expected to remain relevant for fund managers, service providers and regulators alike as discussions on the future of depositary services continue.