CASS 6.4 Use of safe custody assets2

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 any other person or6 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 maintained6 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 any other person6 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 (1)(a) are so6 used.

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3. (3)

   For the purposes of obtaining the express prior consent of a 6client under this rule, the consent must be clearly evidenced in writing and6 the signature of the client6 or an equivalent alternative means of affirmative execution6 is required.

4. (4)

   [deleted]4

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[Note: article 5(1) and (2) of the MiFID Delegated Directive6]

6A firm must take appropriate measures to prevent the unauthorised use of safe custody assets for its own account or the account of any other person, such as:

1. (1)

   the conclusion of agreements with clients on measures to be taken by the firm in case the client does not have enough provision on its account on the settlement date, such as borrowing of the corresponding securities on behalf of the client or unwinding the position;

2. (2)

   the close monitoring by the firm of its projected ability to deliver on the settlement date;

3. (3)

   the putting in place of remedial measures if the firm cannot deliver on the settlement date; and

4. (4)

   the close monitoring and prompt requesting of undelivered securities outstanding on the settlement day and beyond.

[Note: article 5(3) of the MiFID Delegated Directive]

6A firm must adopt specific arrangements for all clients to ensure that the borrower of client safe custody assets provides the appropriate collateral and that the firm monitors the continued appropriateness of such collateral and takes the necessary steps to maintain the balance with the value of the client safe custody assets.

[Note: article 5(4) of the MiFID Delegated Directive]

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 5(2), second sub-paragraph of the MiFID Delegated Directive6]