text
stringlengths 6
768k
|
|---|
rules or the customs and practices in the London custody market. It may be difficult or impossible for the Trust to sue the |
Zurich Sub-Custodian or any other sub-custodian in a United States, New York or other court situated in the United States. In addition, |
it may be difficult, time consuming and/or expensive for the Trust to enforce in a foreign court a judgment rendered by a United |
States, New York or other court situated in the United States. 29 Although the relationship between the Custodian and the Zurich |
Sub-Custodian concerning the Trust’s allocated gold is expressly governed by English law, a court hearing any legal |
dispute concerning their arrangement may disregard that choice of law and apply Swiss law, in which case the ability of the Trust |
to seek legal redress against the Zurich Sub-Custodian may be frustrated. The obligations of the Zurich Sub-Custodian under its arrangement |
with the Custodian with respect to the Trust’s allocated gold is expressly governed by English law. Nevertheless, a |
court in the United States, England or Switzerland may determine that English law should not apply and, instead, apply Swiss law |
to that arrangement. Not only might it be difficult or impossible for a United States or English court to apply Swiss law to the |
Zurich Sub-Custodian’s arrangement, but application of Swiss law may, among other things, alter the relative rights and obligations |
of the Custodian and the Zurich Sub-Custodian to the extent that a loss to the Trust’s gold may not have adequate or |
any legal redress. Further, the ability of the Trust to seek legal redress against the Zurich Sub-Custodian may be frustrated |
by application of Swiss law. The Trust may not have adequate sources of recovery if its gold |
is lost, damaged, stolen or destroyed. If the Trust’s gold is lost, damaged, stolen or destroyed |
under circumstances rendering a party liable to the Trust, the responsible party may not have the financial resources sufficient |
to satisfy the Trust’s claim. For example, as to a particular event of loss, the only source of recovery for the Trust might |
be limited to the Custodian, the Zurich Sub-Custodian or any other sub-custodian or, to the extent identifiable, other responsible |
third parties (e.g., a thief or terrorist), any of which may not have the financial resources (including liability insurance coverage) |
to satisfy a valid claim of the Trust. Shareholders and Authorized Participants lack the right under |
the Custody Agreements to assert claims directly against the Custodian, the Zurich Sub-Custodian, and any other sub-custodian. Neither the Shareholders nor any Authorized Participant have |
a right under the Custody Agreements to assert a claim of the Trust against the Custodian, the Zurich Sub-Custodian, or any other |
sub-custodian. Claims under the Custody Agreements may only be asserted by the Trustee on behalf of the Trust. The Custodian may be reliant to use the Zurich Sub-Custodian |
for the safekeeping of all or a substantial portion of the Trust’s gold. Furthermore, the Custodian has limited obligations |
to oversee or monitor the Zurich Sub-Custodian. As a result, failure by any Zurich Sub-Custodian to exercise due care in the |
safekeeping of the Trust’s gold could result in a loss to the Trust. Gold generally trades on a loco London or loco Zurich basis |
whereby the physical gold is held in vaults located in London or Zurich or is transferred into accounts established in London or |
Zurich. The Custodian has a vault in Zurich and is able to use the Zurich Sub-Custodian for the safekeeping of all or a substantial |
portion of the Trust’s allocated gold. Other than obligations to (1) use reasonable care in appointing the Zurich Sub-Custodian, |
(2) require any Zurich Sub-Custodian to segregate the gold held by it for the Trust from any other gold held by it for the Custodian |
and any other customers of the Custodian by making appropriate entries in its books and records and (3) ensure that the Zurich |
Sub-Custodian provides confirmation to the Trustee that it has undertaken to segregate the gold held by it for the Trust, the Custodian |
is not liable for the acts or omissions of the Zurich Sub-Custodian. Other than as described above, the Custodian does not undertake |
to monitor the performance by the Zurich Sub-Custodian of its custody functions. The Trustee’s obligation to monitor the |
performance of the Custodian is limited to receiving and reviewing the reports of the Custodian. The Trustee does not monitor the |
performance of the Zurich Sub-Custodian or any other sub-custodian. In addition, the ability of the Trustee and the Sponsor to |
monitor the performance of the Custodian may be limited because under the Custody Agreements, the Trustee and the Sponsor have |
only limited rights to visit the premises of the Custodian or the Zurich Sub-Custodian for the purpose of examining the Trust’s |
gold and certain related records maintained by the Custodian or Zurich Sub-Custodian. As a result of the above, any failure by any Zurich Sub-Custodian |
to exercise due care in the safekeeping of the Trust’s gold may not be detectable or controllable by the Custodian or the |
Trustee and could result in a loss to the Trust. 30 Because the Trustee does not, and the Custodian has limited |
obligations to, oversee and monitor the activities of sub-custodians who may hold the Trust’s gold, failure by the sub-custodians |
to exercise due care in the safekeeping of the Trust’s gold could result in a loss to the Trust. Under the Allocated Account Agreement, the Custodian may appoint |
from time to time one or more sub-custodians to hold the Trust’s gold on a temporary basis pending delivery to the Custodian. |
The sub-custodians which the Custodian currently uses are the Bank of England, ICBC Standard Bank plc, The Bank of Nova Scotia |
– ScotiaMocatta, HSBC Bank plc, Malca-Amit SA Zurich, Union Bank of Switzerland (“UBS”) and Brinks Global Services |
Inc. and the Custodian may use other LBMA clearing members that provide bullion vaulting and clearing services to third parties. |
The Custodian has selected the Zurich Sub-Custodian, and the Zurich Sub-Custodian may maintain custody of all of the Trust’s |
allocated gold for the Custodian. The Custodian is required under the Allocated Account Agreement to use reasonable care in appointing |
the Zurich Sub-Custodian and any other sub-custodians, making the Custodian liable only for negligence or bad faith in the selection |
of such sub-custodians, and has an obligation to use commercially reasonable efforts to obtain delivery of the Trust’s gold |
from any sub-custodians appointed by the Custodian. Otherwise, the Custodian is not liable for the acts or omissions of its sub-custodians. |
These sub-custodians may in turn appoint further sub-custodians, but the Custodian is not responsible for the appointment |
of these further sub-custodians. The Custodian does not undertake to monitor the performance by sub-custodians of their |
custody functions or their selection of further sub-custodians. The Trustee does not monitor the performance of the Custodian |
other than to review the reports provided by the Custodian pursuant to the Custody Agreements and does not undertake to monitor |
the performance of any sub-custodian. Furthermore, except for the Zurich Sub-Custodian, the Trustee may have no right |
to visit the premises of any sub-custodian for the purposes of examining the Trust’s gold or any records maintained |
by the sub-custodian, and no sub-custodian will be obligated to cooperate in any review the Trustee may wish to |
conduct of the facilities, procedures, records or creditworthiness of such sub-custodian. In addition, the ability of the |
Trustee to monitor the performance of the Custodian may be limited because under the Allocated Account Agreement and the Unallocated |
Account Agreement the Trustee has only limited rights to visit the premises of the Custodian and the Zurich Sub-Custodian for the |
purpose of examining the Trust’s gold and certain related records maintained by the Custodian and the Zurich Sub-Custodian. |
See “Custody of the Trust’s Gold” for more information about sub-custodians that may hold the Trust’s gold. The obligations of any sub-custodian of the Trust’s |
gold are not determined by contractual arrangements but by LBMA rules and London bullion market customs and practices, which may |
prevent the Trust’s recovery of damages for losses on its gold custodied with sub-custodians. Except for the Custodian’s arrangement with the Zurich |
Sub-Custodian, there are expected to be no written contractual arrangements between sub-custodians that hold the Trust’s |
gold and the Trustee or the Custodian because traditionally such arrangements are based on the LBMA’s rules and on the customs |
and practices of the London bullion market. In the event of a legal dispute with respect to or arising from such arrangements, |
it may be difficult to define such customs and practices. The LBMA’s rules may be subject to change outside the control of |
the Trust. Under English law, neither the Trustee nor the Custodian would have a supportable breach of contract claim against a sub-custodian for |
losses relating to the safekeeping of gold. If the Trust’s gold is lost or damaged while in the custody of a sub-custodian, |
the Trust may not be able to recover damages from the Custodian or the sub-custodian. Whether a sub-custodian will be |
liable for the failure of sub-custodians appointed by it to exercise due care in the safekeeping of the Trust’s gold |
will depend on the facts and circumstances of the particular situation. Shareholders cannot be assured that the Trustee will be |
able to recover damages from sub-custodians whether appointed by the Custodian or by another sub-custodian for any |
losses relating to the safekeeping of gold by such sub-custodians. Gold bullion allocated to the Trust in connection with the |
creation of a Basket may not meet the London Good Delivery Standards and, if a Basket is issued against such gold, the Trust may |
suffer a loss. Neither the Trustee nor the Custodian independently confirms |
the fineness of the gold allocated to the Trust in connection with the creation of a Basket. The gold bullion allocated to the |
Trust by the Custodian may be different from the reported fineness or weight required by the LBMA’s standards for gold bars |
delivered in settlement of a gold trade (London Good Delivery Standards), the standards required by the Trust. If the Trustee nevertheless |
issues a Basket against such gold, and if the Custodian fails to satisfy its obligation to credit the Trust the amount of any deficiency, |
the Trust may suffer a loss. 31 Gold held in the Trust’s unallocated gold account and |
any Authorized Participant’s unallocated gold account is not segregated from the Custodian’s assets. If the Custodian |
becomes insolvent, its assets may not be adequate to satisfy a claim by the Trust or any Authorized Participant. In addition, in |
the event of the Custodian’s insolvency, there may be a delay and costs incurred in identifying the bullion held in the Trust’s |
allocated gold account. Gold which is part of a deposit for a purchase order or part |
of a redemption distribution is held for a time in the Trust Unallocated Account and, previously or subsequently in, the Authorized |
Participant Unallocated Account of the purchasing or redeeming Authorized Participant. During those times, the Trust and the Authorized |
Participant, as the case may be, have no proprietary rights to any specific bars of gold held by the Custodian and are each an |
unsecured creditor of the Custodian with respect to the amount of gold held in such unallocated accounts. In addition, if the Custodian |
fails to allocate the Trust’s gold in a timely manner, in the proper amounts or otherwise in accordance with the terms of |
the Unallocated Account Agreement, or if a sub-custodian fails to so segregate gold held by it on behalf of the Trust, |
unallocated gold will not be segregated from the Custodian’s assets, and the Trust will be an unsecured creditor of the Custodian |
with respect to the amount so held in the event of the insolvency of the Custodian. In the event the Custodian becomes insolvent, |
the Custodian’s assets might not be adequate to satisfy a claim by the Trust or the Authorized Participant for the amount |
of gold held in their respective unallocated gold accounts . In the case of the insolvency of the Custodian, a liquidator |
may seek to freeze access to the gold held in all of the accounts held by the Custodian, including the Trust Allocated Account. |
Although the Trust would be able to claim ownership of properly allocated gold, the Trust could incur expenses in connection with |
Subsets and Splits