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CASS 6.4 Use of safe custody assets2

CASS 6.4.1R
  1. (1)

    1A firm must not enter into arrangements for securities financing transactions in respect of safe custody assets 2 held by it on behalf of a client or otherwise use such safe custody assets 2 for its own account or the account of another client of the firm, unless:

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    1. (a)

      the client has given express prior consent to the use of the safe custody assets 2 on specified terms; and

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    2. (b)

      the use of that client's safe custody assets 2 is restricted to the specified terms to which the client consents.

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  2. (2)

    A firm must not enter into arrangements for securities financing transactions in respect of safe custody assets 2 held by it on behalf of a client in an omnibus account held by a third party, or otherwise use safe custody assets 2 held in such an account for its own account or for the account of another client unless, in addition to the conditions set out in (1):

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    1. (a)

      each client whose safe custody assets 2 are held together in an omnibus account has given express prior consent in accordance with (1)(a); or

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    2. (b)

      the firm has in place systems and controls which ensure that only safe custody assets 2 belonging to clients who have given express prior consent in accordance with the requirements of (1)(a) are used.

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  3. (3)

    For the purposes of obtaining the express prior consent of a retail client under this rule the signature of the retail client or an equivalent alternative mechanism is required.

  4. (4)

    [deleted]4

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[Note: article 19 of the MiFID implementing Directive]

CASS 6.4.1AG

5The FCA expects firms which enter into arrangements under CASS 6.4.1 R with retail clients to only enter into securities financing transactions and not otherwise use retail client's safe custody assets.

CASS 6.4.2G

Firms are reminded of the client's best interests rule, which requires the firm to act honestly, fairly and professionally in accordance with the best interests of their clients. For any transactions involving retail clients carried out under this section the FCA expects that:5

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  1. (1)

    the firm ensures that relevant collateral is provided by the borrower in favour of the client;

  2. (2)

    the current realisable value of the safe custody asset 2 and of the relevant collateral is monitored daily; and

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  3. (3)

    the firm provides relevant collateral to make up the difference where the current realisable value of the collateral falls below that of the safe custody asset 2 , unless otherwise agreed in writing by the client.

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CASS 6.4.3R

Where a firm uses safe custody assets 2 as permitted in this section, the records of the firm must include details of the client on whose instructions the use of the safe custody assets 2 has been effected, as well as the number of safe custody assets 2 used belonging to each client who has given consent, so as to enable the correct allocation of any loss.

[Note: article 19(2) of the MiFID implementing Directive]

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