Where security interests, liens or rights of set-off are granted by a firm over safe custody assets, or where the firm has been informed that they are granted, these must be recorded in client contracts and the firm’s own books and records to make the ownership status of safe custody assets clear, such as in the event of an insolvency. belonging to clients who have given express prior consent in accordance with (1)(a) are so6 used. are held on behalf of a professional client and the client requests the firm in writing to deposit them with a third party in that third country8. Therefore any records falling under those requirements should be maintained by the firm, and should be separate to any records the firm may have obtained from any third parties, such as those with whom it may have deposited, or through whom it may have registered legal title to, clients'safe custody assets.6, The FCA expects that compliance by a firm with CASS 6.6 as a whole (to the extent applicable to that firm) will be sufficient to comply with the requirement under CASS 6.6.3R to maintain its records and accounts in a way that ensures they may be used as an audit trail.6. A firm need not carry out a review under (1) in respect of its internal custody record checks, physical asset reconciliations and external custody reconciliations, if it already conducts the particular process in respect of all relevant safe custody assets each business day. appropriate a number of applicable assets in accordance with (a) and an amount of money in accordance with (b) which, in aggregate, are sufficient to cover the value of the shortfall. safe custody assets2 A safe custody investment is, in summary, a designated investment which a firm receives or holds on behalf of a client. in the context of the service being provided for the firm’sclient the applicable law of that third country requires the use of a central securities depositary, securities settlement system or central counterparty; the rules of that central securities depositary, securities settlement system or central counterparty are subject to the oversight of a regulator that performs that function under the applicable law; and. does not apply to a firm following its failure. If you're concerned about child sexual exploitation, you should also complete the child screening exploitation tool. A firm must retain any documents created under (1) for a period of at least five years after the date it ceases to use the rolling stock method to perform its physical asset reconciliation. where the firm has found that the value of the safe custody asset has changed, adjust the amount of money it has appropriated to ensure that these monies are sufficient to cover the latest value of the safe custody asset. [Note: recital 9 to the MiFID Delegated Directive]. , CASS 6.2.3AR, CASS 6.2.3BG, CASS 6.2.7R, 13 safe custody assets2 Further complexity arose as it emerged that the operations team dealing with the project had been historically responsible for the oversight of the client money administered by the third party. This should include, for example, establishing and maintaining policies and procedures concerning: the frequency and method of the checks and reconciliations the firm is required to carry out under this section; the frequency with which the firm is required to review its arrangements in compliance with this chapter; and. ©2020 Protiviti Inc. All Rights Reserved. A firm that holds physical safe custody assets must perform a physical asset reconciliation for all the physical safe custody assets it holds for clients: as regularly as is necessary but without allowing more than six months to pass between each physical asset reconciliation; and. Custody assets include designated investments, and any other assets that the firm holds or may hold in the same portfolio as a designated investment held for or on behalf of a client.5, Firms to which the custody rules apply by virtue of CASS 6.1.1R (1B) or (1E) 12must also apply the custody rules to those custody assets which are not safe custody investments in a manner appropriate to the nature and value of those custody assets.10, Firms to which the custody rules apply by virtue of CASS 6.1.1R (1C) must also apply the custody rules:10, to those custody assets which are not AIF custodial assets but are safe custody investments; and. Where a firm deposits safe custody assets belonging to a client with a third party or where a third party is responsible for the registration of legal title to that asset,2 in complying with the requirements of CASS 6.6.34 R, the firm should seek to ensure that the third party provides the firm with adequate information (for example in the form of a statement) as at a date specified by the firm which details the description and amounts of all the safe custody assets credited to the relevant account(s) and that this information is provided in sufficient time to allow the firm to carry out its external custody reconciliations under CASS 6.6.37 R. If a firmacting as trustee or depositary of an AIF that is an authorised AIF deposits safe custody assets belonging to a client with a third party, under article 89(1)(c) (Safekeeping duties with regard to assets held in custody) of the AIFMD level 2 regulation, the firm should seek to ensure that the third party provides the firm with adequate information (for example in the form of a statement) as at a date or dates specified by the firm which details the description and amounts of all the safe custody assets credited to the account(s) and that this information is provided in adequate time to allow the firm to carry out the periodic reconciliations required under article 89(1)(c) (Safekeeping duties with regard to assets held in custody) of the AIFMD level 2 regulation.

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