CACEIS Bank: Decision of the AMF Enforcement Committee of December 17, 2025

Following the H2O AM case, which resulted in a sanction against this management company in 2022, the AMF examined the role of the depositary in the management of H2O’s funds and sanctioned CACEIS Bank for carrying out insufficient and incorrect controls, particularly with regard to the monitoring of investment ratios and the valuation of unlisted securities, as well as the regularity of investment decisions taken by H2O in accordance with statutory constraints. On this occasion, the Enforcement Committee of the French Financial Markets Authority also clarified the ex post supervisory obligations incumbent upon depositaries.

Following an inspection initiated by the French Financial Markets Authority (hereinafter “AMF”) in January 2023 concerning CACEIS Bank’s performance of its professional obligations as depositary on behalf of the H2O funds, the AMF Board notified several grievances relating to the inadequacy of the controls exercised both over the procedures implemented by the management company and over the regularity of the investment decisions taken by it.

This inspection was conducted in the context of previously identified irregularities in the management of H2O funds, which led to the AMF Enforcement Committee’s decision of December 30, 2022 against the management company H2O Asset Management LLP, which was sanctioned for serious breaches of the rules applicable to the management of French UCITS and resulted in record penalties exceeding €90 million.[1]

Major irregularities relating to the acquisition of ineligible or insufficiently liquid unlisted securities had been identified, as well as failures in asset valuation and management that clearly contravened the prudential requirements and investment objectives set out in the funds’ prospectuses.

This decision was upheld by the Conseil d’État in a ruling dated June 13, 2025, which confirmed both the AMF’s jurisdiction over the British management company and the characterization of the alleged breaches and the proportionality of the fine imposed.[2]

Furthermore, the Enforcement Committee’s decision also had civil law consequences,[3] in the context of a class action.[4]

It was in this particularly sensitive regulatory and litigation context that the Enforcement Committee examined the role and diligence of the depositary, focusing on determining whether CACEIS Bank had exercised with the required degree of rigor the supervisory duties incumbent upon it, independently of the breaches already attributed to the management company.

In its decision handed down on December 17, 2025, the Enforcement Committee upheld most of the alleged breaches and imposed a fine of €3.5 million on CACEIS Bank, along with a warning, finding that the depositary had failed to meet the professional requirements attached to its role as a trusted third-party in the management of undertakings for collective investment in transferable securities (hereinafter “UCITS”).[5]

Beyond the penalty imposed, the decision clarifies the scope of the depositary’s obligations, establishing a demanding and substantial approach to its role when carrying out controls over the processes and procedures implemented by the management company (I).

It also highlights a stricter requirement for ex-post control of the regularity of investment decisions and compliance with regulatory and statutory constraints applicable to funds (II).

I. Extended obligations of the depositary in the ex-post control of the management procedures and processes implemented by H2O

The AMF Board criticized CACEIS Bank in particular for insufficient control and verifications over the processes and procedures implemented by H2O to monitor the bond concentration ratio, even though anomalies had been identified by CACEIS Bank itself, in violation of Commission Delegated Regulation (EU) No. 2016/438 of December 17, 2015, supplementing Directive 2009/65/EC concerning the depositaries’ obligations.[6] The statement of objections also criticized the inadequacy of the audits carried out by CACEIS Bank.[7]

In response to these allegations, CACEIS Bank argued in particular that “the depositary’s supervisory obligations are obligations of means and not of result, so that an error of judgment made during its audit cannot in itself constitute a breach, provided that these audits were carried out in an honest, fair, professional, independent and in the exclusive interest of the H2O funds and their holders, in accordance with Article L.214-9 of the French Monetary and Financial Code”.[8] However, the Committee points out that, while the depositary’s obligations are indeed obligations of means, such obligations require the deployment of appropriate, continuous and proportionate measures to the risks identified.

The Enforcement Committee notes that the depositary cannot merely ascertain the existence of internal procedures within the management company. It is required to perform its own, independent and effective ex-post control of the processes implemented, in order to ensure that they effectively guarantee compliance with the statutory and regulatory ratios applicable to the funds.

In breach of Article 3 of Commission Delegated Regulation (EU) No. 2016/438 of December 17, 2015, supplementing Directive 2009/65/EC concerning the depositaries’ obligations, CACEIS Bank carried out insufficient ex-post controls and verifications on the processes and procedures implemented by H2O to monitor the bond leverage ratio over a period from January 24, 2017, to December 31, 2022.

It has been established that during the period under review, CACEIS Bank carried out only one audit in 2017. The audit, which was limited to the equity concentration ratio, did not identify the incompleteness of the investment ratio control system, in particular the absence of a reliable process for calculating and monitoring the ratios.

In examining this allegation, the Enforcement Committee recalls that Article 3(2) of Commission Delegated Regulation (EU) 2016/438 of December 17, 2015, supplementing Directive 2009/65/EC concerning the depositaries’ obligations, creates an obligation for the depositary to carry out ex post controls and verifications on processes and procedures.[9] It states that “the depositary must use reasonable means to ensure, in particular by carrying out ex post checks and verifications on the investment ratio control mechanisms put in place by the asset management company, that the investment decisions taken by the latter comply with the applicable regulatory and statutory ratios”.[10]

The Committee noted that CACEIS Bank’s terms of reference, approved by the AMF, included this obligation to carry out ex post checks on the regularity of H2O’s decisions and, in particular, compliance with regulatory and specific management ratios. However, the audits carried out, in particular a 2017 audit that had rated the investment ratio control system as satisfactory, revealed several shortcomings. It noted, with regard to the bond concentration ratio in particular, that no consistency checks had been carried out on the calculations made by H2O, whereas the depositary must, at a minimum, have access to the calculation and monitoring methodologies for the investment ratios in order to verify their application, which was not the case in this case.[11] The Enforcement Committee adds in this regard that the procedure did not provide any indication of the documentation and retention of the controls performed.[12]

In this case, the procedure did not provide any details regarding the calculation and monitoring methods applicable to the investment ratios of the H2O funds, thus demonstrating its shortcomings, which the depositary, CACEIS Bank, should have identified during the 2017 audit. The Enforcement Committee concludes that “The procedure for monitoring H2O investment ratios, which did not provide any details on how to calculate and monitor the investment ratios applicable to H2O funds, was incomplete, which CACEIS Bank should have identified during the 2017 follow-up audit. It was therefore neither appropriate nor verifiable by the depositary”.[13]

In addition, the Enforcement Committee upheld the allegations relating to the ex post controls and verifications carried out by CACEIS Bank on the processes and procedures implemented by H2O for the valuation of unlisted securities held by H2O funds. In this regard, the Committee stated that “while the depositary is not required to ensure that all net asset values used by asset management companies comply with legislative or regulatory provisions, the UCITS’ rules or instruments of incorporation, or its prospectus, it must nevertheless take reasonable steps to ensure this, in particular by carrying out ex post checks and verifications on the asset management companies’ valuation control systems and, more specifically, on their appropriateness and controllability”.[14]

In this case, the Enforcement Committee considered that the audits and controls carried out by CACEIS Bank did not enable it to verify the relevance of the data used by H2O to value unlisted securities and was therefore not in a position to verify them.[15]

Accordingly, this decision establishes a demanding approach to the depositary’s obligations, which is required to carry out independent and effective ex post control of management procedures. The depositary must have precise, appropriate and operational procedures in place for monitoring investment ratios and valuing securities, but must also verify that such procedures are operational, traceable and genuinely effective, so as to enable it to identify any deficiencies in the control mechanisms.

II. Absence or insufficiency of control over H2O’s compliance with statutory and regulatory investment constraints

CACEIS Bank was also criticized for failing to identify, and a fortiori to review, the compliance of investment decisions made by H2O with statutory investment constraints applicable to the acquisition of debt securities, even though specific controls were provided for in its terms of reference.[16]

After pointing out that “the depositary must establish and implement controls, at least ex post, to verify the regularity of the asset management company’s decisions, particularly with regard to the rules governing investment and the composition of the fund’s assets, which implies having previously identified any investment constraints”,[17] the Enforcement Committee examined the prospectuses of the funds in question and noted that they contained several constraints, including a prohibition on investing in unrated OECD private bonds whose issuer was also unrated[18], limits on holdings of OECD private bonds rated Investment Grade or Speculative Grade, without CACEIS Bank having identified these constraints in the NBP files for the funds in question or without these constraints having been sufficiently explicit as to the methods used to assess these ratings.

The Enforcement Committee also noted that CACEIS Bank had not implemented controls for ensuring that investment instructions were executed in accordance with those constraints.[19]

A similar allegation was upheld against CACEIS Bank with regard to the review of the compliance of investment decisions made by H2O with statutory investment constraints on foreign exchange swaps and Total Return Swaps (“TRS”).[20] The Committee noted that this regulatory concentration limit relating to bond securities, set out in Article R. 214-26 of the French Monetary and Financial Code, had not been subject to ex post control during the period in question.[21]

These various breaches occurred in a context that heightens their seriousness. The Enforcement Committee noted that CACEIS Bank had been alerted on several occasions to the scale and concentration of the H2O funds’ exposures to Tennor securities, first by a Clearstream alert in December 2017,[22] then by the publication of an article in the Financial Times on June 18, 2019, publicly revealing the magnitude of those positions as well as the liquidity risks associated with those assets.[23]

This internal and public signals constituted converging warnings that required the depositary, in this case CACEIS Bank, to exercise increased vigilance and immediately strengthen its ex post controls. However, the Committee found that these alerts did not lead CACEIS Bank to effectively and sustainably adapt its investment ratio monitoring and valuation control system.[24]

Despite having identified the presence of high-risk Tennor securities, CACEIS Bank limited itself to ad hoc and incomplete measures, without carrying out checks to verify the eligibility of the assets concerned in light of the rating constraints set out in the H2O funds’ prospectuses.[25] As a result, the seriousness of the breaches identified by the Enforcement Committee lies in the systemic and repeated nature of the shortcomings observed, despite warnings received.[26]

Finally, in the present case, the proceedings before the Enforcement Committee were not intended to provide compensation to investors but solely to impose a financial penalty on CACEIS Bank. However, like the decision handed down on December 30, 2022, against the management company H2O Asset Management LLP, which gave rise to civil proceedings in the form of class actions, this decision is likely to constitute a factual and legal basis for possible civil or commercial claims.