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Status: You are viewing the version of the handbook as on 2009-03-31.

CASS 6.2 Holding of client assets

Requirement to protect clients' safe custody assets2

CASS 6.2.1RRP

1A firm must, when holding safe custody assets 2 belonging to clients, make adequate arrangements so as to safeguard clients' ownership rights, especially in the event of the firm's insolvency, and to prevent the use of safe custody assets 2 belonging to a client on the firm's own account except with the client's express consent.

[Note: article 13(7) of MiFID]

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Requirement to have adequate organisational arrangements

CASS 6.2.2RRP

A firm must introduce adequate organisational arrangements to minimise the risk of the loss or diminution of clients' safe custody assets,2 or the rights in connection with those safe custody assets,2 as a result of the misuse of the safe custody assets,2 fraud, poor administration, inadequate record-keeping or negligence.

[Note: article 16(1)(f) of the MiFID implementing Directive]

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Registration and recording of legal title2

CASS 6.2.3RRP

To the extent practicable, a firm must effect appropriate registration or recording of legal title to a safe custody asset 2 in the name of:

2
  1. (1)

    the client (or, where appropriate, the trustee firm), unless the client is an authorised person acting on behalf of its client, in which case it may be registered in the name of the client of that authorised person;

  2. (2)

    a nominee company which is controlled by:

    1. (a)

      the firm;

    2. (b)

      an affiliated company;

    3. (c)

      a recognised investment exchange or a designated investment exchange; or

    4. (d)

      a third party with whom financial instruments are deposited under CASS 6.3;

  3. (3)

    any other third party if:

    1. (a)

      the safe custody asset 2 is subject to the law or market practice of a jurisdiction outside the United Kingdom and the firm has taken reasonable steps to determine that it is in the client's best interests to register or record it in that way, or that it is not feasible to do otherwise, because of the nature of the applicable law or market practice; and

      2
    2. (b)

      the firm has notified the client in writing;

  4. (4)

    the firmif:

    1. (a)

      the safe custody asset 2 is subject to the law or market practice of a jurisdiction outside the United Kingdom and the firm has taken reasonable steps to determine that it is in the client's best interests to register or record it in that way, or that it is not feasible to do otherwise, because of the nature of the applicable law or market practice; and

      2
    2. (b)

      the firm has notified the client if a professional client, or obtained prior written consent if a retail client.

CASS 6.2.4RRP

A firm must accept the same level of responsibility to its client for any nominee company controlled by the firm with respect of any requirements of the custody rules.

CASS 6.2.5RRP

A firm may register or record legal title to its own applicable assets 2 in the same name as that in which legal title to a safe custody asset 2 is registered or recorded, but only if:

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  1. (1)

    the firm's applicable assets 2 are separately identified in the firm's records from the safe custody assets;2 or

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  2. (2)

    the firm registers or records a safe custody asset 2 in accordance with CASS 6.2.3R (4).

    2
CASS 6.2.6GRP

A firm when complying with CASS 6.2.3R (3) or CASS 6.2.3R (4) will be expected to demonstrate that adequate investigations have been made of the market concerned by reference to local sources, which may include an appropriate legal opinion.

CASS 6.2.7RRP

A firm must ensure that any documents of title to applicable assets 2 in bearer form, belonging to the firm and which it holds in its physical possession, are kept separately from any document of title to a client's safe custody assets 2 in bearer form.

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