• COBS 14. COBS 14. CLIENT MONEY AND RELEVANT MONEY PROVISIONS

    • COBS 14.1 COBS 14.1 Client Assets

      • COBS 14.1.1 Application

        This section applies to an Authorised Person which:

        (a) holds or controls Client Assets;
        (b) Provides Custody or Arranges Custody; or
        (c) holds or controls Relevant Money.

      • COBS 14.1.2 COBS 14.1.2

        [Deleted]

        • Guidance

          1. Principle 9 of the Principles for Authorised Persons (Customer assets and money) in GEN 2.2.9 requires an Authorised Person to arrange proper protection for Clients' Assets and Relevant Money where the Authorised Person is responsible for them. An essential part of that protection is that an Authorised Person must properly safeguard Client Assets held or controlled on behalf of a Client in the course of, or in connection with, the carrying on of Investment Business, or properly safeguard Relevant Money in the course of the delivery of Payment Services, in or from the Abu Dhabi Global Market.
          2. An Authorised Person must introduce adequate organisational arrangements to minimise the risk of the loss or diminution of Client Assets and Relevant Money, or of rights in connection with Client Assets and Relevant Money, as a result of, for example, the Authorised Person's or a third party's insolvency, fraud, poor administration, inadequate recordkeeping or negligence.
          3. For the purposes of interpretation of this Chapter by an Authorised Person engaging in Payment Services as part of undertaking the Regulated Activity of Providing Money Services, only those Rules which apply to Relevant Money shall be applicable. References which require the safekeeping of Relevant Money in a Client Account do not result in a Payment Service User becoming a Client of a Payment Service Provider.

      • COBS 14.1.3 General Requirements

        (a) An Authorised Person which holds or controls Client Money or Relevant Money must comply with the provisions of Rule 14.2 (the "Client Money Rules") in relation to that Client Money or Relevant Money, as applicable, and have systems and controls in place to be able to evidence compliance with the Client Money Rules.
        (b) An Authorised Person which also holds or controls Client Investments, Provides Custody or Arranges Custody must also comply with Chapter 15.
        (c) An Authorised Person must have systems and controls to ensure that Client Assets and Relevant Money are identifiable and secure at all times.
        (d) Where the Authorised Person holds a mandate, or similar authority over an account with a third party, in the Client's own name, its systems and controls must:
        (i) include a current list of all such mandates and any conditions placed by the Client or by the Authorised Person on the use of the mandate;
        (ii) include the details of the procedures and authorities for the giving and receiving of instructions under the mandate; and
        (iii) ensure that all Transactions entered into using such a mandate are recorded and are within the scope of the authority of the Employee and the Authorised Person entering into such Transactions.

      • COBS 14.1.4 COBS 14.1.4 Holding or Controlling Client Assets or Relevant Money

        Client Assets or Relevant Money are held or controlled by an Authorised Person if they are:

        (a) directly held by the Authorised Person;
        (b) held in an account in the name of the Authorised Person; or
        (c) held by a Person, or in an account in the name of a Person, controlled by the Authorised Person.

        • Guidance

          1. The Regulator would consider a Person to be controlled by an Authorised Person if that Person is inclined to act in accordance with the instructions of the Authorised Person.
          2. The Regulator would consider an account to be controlled by an Authorised Person if that account is operated in accordance with the instructions of the Authorised Person.

    • COBS 14.2 COBS 14.2 Client Money and Relevant Money Rules

      • COBS 14.2.1

        All Money held or controlled on behalf of a Client in the course of, or in connection with, the carrying on of Investment Business in or from the Abu Dhabi Global Market is Client Money, except Money which is:

        (a) held by the Authorised Person acting as Banks as a deposit on its own books, provided the Authorised Person notifies the Client in writing that the Client Money is held by it as a Bank and not as Client Money;
        (b) due and payable by the Client to the Authorised Person;
        (c) in an account in the Client's name over which the Authorised Person has a mandate or similar authority and who is in compliance with these Rules;
        received in the form of a cheque, or other payable order, made payable to a third party other than a Person or account controlled by the Authorised Person, provided the cheque or other payable order is intended to be forwarded to the third party within one Business Day of receipt; or
        (e) Fund Property of a Fund.

      • COBS 14.2.1A

        All Money held or controlled by a Payment Service Provider on behalf of a Payment Service User in the course of, or in connection with, the carrying on of Payment Services in or from the Abu Dhabi Global Market is Relevant Money from the time of its receipt, except Money which is due and payable to the Authorised Person from the Payment Service User.

      • COBS 14.2.2 COBS 14.2.2

        [Deleted]

        • Guidance

          1. The exemption in Rule 14.2.1(a) does not apply to Money which is held in a Client Account with a third party i.e. not held in an account with the Authorised Person itself.
          2. Pursuant to Rule 14.2.1(b), examples of Money which is due and payable to an Authorised Person include Money which is:
          (i) paid by the way of brokerage, fees and other charges to the Authorised Person or where the Authorised Person is entitled to deduct such remuneration from the Client Money held or controlled;
          (ii) paid by the Authorised Person in relation to a Client purchase or in settlement of a margin payment in advance of receiving a payment from the Client; or
          (iii) owed by the Client to the Authorised Person in respect of unpaid purchases by or for the Client if delivery of Investments has been made to the Client or credited to his account.
          3. The Fund Rules contain specific provisions relating to the handing of Fund Property and also provisions relating to a Fund Administrator holding or controlling monies or assets belonging to third parties.
          4. Chapter 19 also contains specific provisions relating to the handling of Relevant Money by an Authorised Person conducting Payment Services.

      • COBS 14.2.3 Holding or Controlling Client Money or Relevant Money

        (a) An Authorised Person in Category 4 must not hold Client Money.
        (b) An Authorised Person which holds or controls Client Money for a Client or Relevant Money for a Payment Service User must comply with these Client Money Rules, and also the specific provisions in Chapter 19 relating to Relevant Money, as applicable.
        (c) Where the Client is a Market Counterparty, an Authorised Person engaging in Investment Business may exclude the application of the Client Money Rules but only where it has obtained the prior written consent of the Market Counterparty to do so.
        (d) An Authorised Person which holds or controls Client Money must arrange for a Client Money Auditor's Report to be submitted to the Regulator on an annual basis.

      • COBS 14.2.4 COBS 14.2.4 Payment of Client Money or Relevant Money into Client Accounts

        (a) Subject to the requirements in Chapter 19 in relation to Payment Services, where an Authorised Person holds or controls Client Money or Relevant Money it must ensure, except where otherwise provided in these Rules, that the Client Money and Relevant Money is paid into one or more Client Accounts within one Business Day of receipt.
        (b) An Authorised Person must not hold or deposit its own Money into a Client Account, except where:
        (i) it is a minimum sum required to open the account, or to keep it open;
        (ii) the Money is received by way of mixed remittance, provided the Authorised Person transfers out that part of the payment which is not Client Money or Relevant Money within one Business Day of the day on which the Authorised Person would normally expect the remittance to be cleared;
        (iii) interest credited to the account exceeds the amount payable to Clients or Payment Service Users, as applicable, provided that the Money is removed within twenty Business Days; or
        (iv) it is to meet a shortfall in Client Money or Relevant Money.
        (c) Where an Authorised Person deposits any Money into a Client Account, such Money is Client Money or Relevant Money, as applicable, until such time as the Money is withdrawn from the Client Account in accordance with the Client Money Rules or the requirements of Chapter 19 in the case of an Authorised Person conducting Payment Services.
        (d) An Authorised Person must maintain systems and controls for identifying Money which must not be in a Client Account and for transferring it out of the Client Account without delay.
        (e) Where an Authorised Person is aware that a Person may make a payment of Client Money or Relevant Money to the Authorised Person, it must take reasonable steps:
        (i) to ensure that the Person has sufficient information of the relevant account details to be able to transfer Client Money or Relevant Money, as applicable, directly to a Client Account, or otherwise to enable the Authorised Person to identify the Client Money or Relevant Money, as applicable; and
        (ii) to ensure that the Authorised Person is notified by that Person of such payment as soon as reasonably practicable.
        (f) An Authorised Person must have procedures for identifying Client Money and Relevant Money received by the Authorised Person, and for promptly recording the receipt of the Money either in the books of account or a register for later posting to and recording in the Client Account, or as otherwise specified in Chapter 19 of these Rules. The procedures must cover Client Money or Relevant Money, as applicable, received by the Authorised Person through any means.
        Guidance
        An Authorised Person holding or controlling Relevant Money in connection with the conduct of Payment Services is expected to identify, record and reconcile such amounts in accordance with the requirements of Chapter 19.

        • Guidance

          An Authorised Person holding or controlling Relevant Money in connection with the conduct of Payment Services is expected to identify, record and reconcile such amounts in accordance with the requirements of Chapter 19.

      • COBS 14.2.5 COBS 14.2.5 Client Accounts

        (a) A Client Account in relation to Client Money or Relevant Money, as applicable, is an account which:
        (i) is held with a Third-Party Agent as banker, pursuant to Rules 14.2.714.2.8;
        (ii) is established to hold Client Money or Relevant Money, as applicable;
        (iii) is maintained in the name of:
        (A) if an Abu Dhabi Global Market Firm, the Authorised Person; or
        (B) if a non-Abu Dhabi Global Market Firm, a Nominee Company controlled by the Authorised Person; and
        (iv) includes the words "Client Account" in its title.
        (b) An Authorised Person: 
        (i) must hold Client Money in a Client Account, a Designated Client Account or a Designated Client Fund Account. Rule 14.2.5 applies to each type of Client Account; and
        (ii) conducting Payment Services must hold Relevant Money in a Client Account.
        (c) An Authorised Person must maintain a master list of all Client Accounts. The master list must detail:
        (i) the name of the account;
        (ii) the account number;
        (iii) the location of the account;
        (iv) the banker or custodian, its address and contact information;
        (v) the account terms and conditions;
        (vi) whether the account is currently open or closed; and
        (vii) the date of opening or closure.
        (d) The details of the master list must be documented and maintained for at least six years following the closure of an account.

        • Guidance

          1. An Authorised Person holds all Client Money or Relevant Money, as applicable in Client Accounts for its Clients as part of a common pool of money so those particular Clients or Payment Service Users, as applicable, do not have a claim against a specific sum in a specific account; they only have a pro rata claim to the Client Money or Relevant Money, as applicable, in general to which a particular Statutory Trust relates, as one of the beneficiaries of such Statutory Trust. The purpose of controlling or holding Client Money or Relevant Money, as applicable, in a Client Account is to ensure that Money belonging to Clients or Payment Service Users, as applicable is segregated and readily identifiable from Money belonging to the Authorised Person, such that, following a Pooling Event, Clients or Payment Service Users, as applicable, will have a joint property interest in the Client Money or Relevant Money, as applicable, in proportion to each Client's or Payment Service Users’ entitlement in the Statutory Trust.
          2. Alternatively, an Authorised Person may hold or control Client Money belonging to a Client in a Client Account constituting a Statutory Trust solely for that Client i.e. a Designated Client Account or Designated Client Fund Account. An Authorised Person holds Client Money in Designated Client Accounts or Designated Client Fund Accounts for those Clients that requested their Client Money be part of a specific pool of money, so those particular Clients have a property interest in relation to a specific sum in a specific account constituting a Statutory Trust; they do not have a claim to the Client Money even if a Primary Pooling Event occurs (as described in Rule 14.4.2).
          3. A Designated Client Fund Account may be used for a Client only where that Client has consented to the use of that account and all other Designated Client Fund accounts which may be pooled with it. For example, a Client who consents to the use of bank A and bank B should have Client Money related to it held in a different Designated Client Fund account at bank B from a Client who has consented to the use of banks B and C.
          4. A Primary Pooling Event triggers a notional pooling of all the Client Money related to each Statutory Trust. The obligation to distribute Client Money or Relevant Money, as applicable, following a Pooling Event is described in the Client Money Distribution Rules.

      • COBS 14.2.6 Exceptions to Holding Client Money in Client Accounts

        (a) The requirement for an Authorised Person to hold Client Money in a Client Account does not, subject to (b), apply with respect to such Client Money:
        (i) received in the form of cheque, or other payable order, until the Authorised Person, or a Person or account controlled by the Authorised Person, is in receipt of the proceeds of that cheque;
        (ii) temporarily held by an Authorised Person before forwarding to a Person nominated by the Client; or
        (iii) in connection with a Delivery Versus Payment Transaction where:
        (A) in respect of a Client purchase, Client Money from the Client will be due to the Authorised Person within one Business Day upon the fulfilment of a delivery obligation; or
        (B) in respect of a Client sale, Client Money will be due to the Client within one Business Day following the Client's fulfilment of a delivery obligation.
        (b) An Authorised Person must pay Client Money received by it of the type described in (a)(ii) or (a)(iii) into a Client Account where it has not fulfilled its delivery or payment obligation within three days of receipt of the Money or Investments, unless in the case of the type of Client Money referred to in (a)(iii)(B), it instead safeguards Client Investments at least equal to the value of such Client Money.
        (c) An Authorised Person must maintain adequate records of all cheques and payment orders received in accordance with (a)(i) including, in respect of each payment, the:
        (i) date of receipt;
        (ii) name of the Client for whom payment is to be credited; and
        (iii) date when the cheque or payment order was presented to the Authorised Person's Third-Party Agent.
        (d) The records must be kept for a minimum of six years.
        (e) Cash held by an Authorised Firm that is a bank as a deposit in its capacity as a bank is not Client Money.
        (f) Cash received under a title transfer collateral arrangement from a Market Counterparty or Professional Client is not Client Money.

      • COBS 14.2.7 Appointment of a Third-Party Agent

        (a) An Authorised Person may pay, or permit to be paid, Client Money or Relevant Money, as applicable, to a Third-Party Agent in accordance with Rule 14.2.8(a) only where it has undertaken a prior assessment of the suitability of that Third-Party Agent and concluded on reasonable grounds that the Third-Party Agent is suitable to hold Client Money or Relevant Money, as applicable, in a Client Account.
        (i) When assessing the suitability of the Third-Party Agent, the Authorised Person must ensure that the Third-Party Agent will provide protections equivalent to the protections conferred by this section.
        (ii) An Authorised Person must have systems and controls in place to ensure that the Third-Party Agent remains suitable.
        (b) An Authorised Person must be able to demonstrate to the Regulator's satisfaction the grounds upon which the Authorised Person considers the Third-Party Agent to be suitable to hold that Client Money or Relevant Money, as applicable.
        (c) When assessing the suitability of a Third-Party Agent, an Authorised Person must have regard to:
        (i) its credit rating;
        (ii) its capital and financial resources in relation to the amount of Client Money or Relevant Money, as applicable, held;
        (iii) the insolvency regime of the jurisdiction in which it is located;
        (iv) its regulatory status and history;
        (v) its Group structure; and
        (vi) its use of agents and service providers.

      • COBS 14.2.8 COBS 14.2.8 Payment of Client Money or Relevant Money to a Third-Party Agent

        (a) Subject to (e), an Authorised Person may pass, or permit to be passed, a Segregated Client's Money to a Third-Party Agent only if:
        (i) the Client Money is to be used in respect of a Transaction or series or Transactions for that Client;
        (ii) the Client Money is to be used to meet an obligation of that Client; or
        (iii) the Third-Party Agent is a Bank or an Authorised Person which is authorised to accept or take Deposits.
        (b) In respect of (a)(i) and (a)(ii), an Authorised Person must not hold any excess Client Money with the Third-Party Agent longer than necessary to effect a Transaction or satisfy the Client's obligation.
        (c) When an Authorised Person opens a Client Account with a Third-Party Agent it must obtain, within a twenty Business Day period, a written acknowledgement from the Third-Party Agent stating that:
        (i) all Money standing to the credit of the account is held by the Authorised Person as agent and that the Third-Party Agent is not entitled to combine the account with any other account or to exercise any charge, mortgage, security, lien, right of set-off or combination or counterclaim against Money in that account in respect of any sum owed to it on any other account of the Authorised Person; and
        (ii) the title of the account includes the words "Client Account" as required under Rule 14.2.5(a)(iv).
        (d) If the Third-Party Agent does not provide the acknowledgement referred to in (c)within a twenty Business Day period, the Authorised Person must refrain from making further deposits of Client Money or Relevant Money, as applicable, with that Third-Party Agent and withdraw any Client Money or Relevant Money, as applicable, standing to the credit of that Client Account.

        • Guidance

          (d) The Regulator would consider twenty Business Days as being a reasonable period for an Authorised Person to receive a written acknowledgement from the Third-Party Agent.
          (e) If the Third-Party Agent does not provide the acknowledgement referred to in Rule 14.2.8(c) within a 30-day period, the Authorised Person must refrain from making further deposits of Client Money with that Third-Party Agent and withdraw any Client Money standing to the credit of that Client Account.

      • COBS 14.2.9 COBS 14.2.9 Payment of Client Money or Relevant Money from Client Accounts

        (a) An Authorised Person must have procedures for ensuring all withdrawals from a Client Account are authorised.
        (b) Subject to Rule 14.2.9(c), a Segregated Client's Client Money must remain in a Client Account until it is:
        (i) due and payable to the Authorised Person;
        (ii) paid to the Client on whose behalf the Client Money is held;
        (iii) paid in accordance with a Client instruction on whose behalf the Client Money is held;
        (iv) required to meet the payment obligations of the Client on whose behalf the Client Money is held;
        (v) becomes held by the Authorised Person pursuant to a title transfer collateral arrangement;
        (vi) becomes held by the Authorised Person in its capacity as a banker as a deposit; or
        (vii) paid out in circumstances that are otherwise authorised by the Regulator.
        (c) Client Money paid out by way of cheque or other payable order under Rule 14.2.9(cb) must remain in a Client Account until the cheque or payable order is presented to the Client's bank and cleared by the paying agent.
        (d) An Authorised Person must not use Client Money belonging of one Client to satisfy an obligation of another Client.

        • Guidance

          1. The effect of (d) is that an Authorised Person would be required to deposit its own Money into a Client Account to remedy a shortfall arising from a Client debit balance.
          2. An Authorised Person must have a system for ensuring no off-setting or debit balances occur on Client Accounts.

      • COBS 14.2.10 Client Disclosure

        (a) Before, or as soon as reasonably practicable after, an Authorised Person receives Client Money belonging to a Client, it must disclose to the Client on whose behalf the Client Money is held:
        (i) the basis and any terms governing the way in which the Client Money will be held;
        (ii) as required under Rule 14.2.14(e), the nature of any particular Client Money Statutory Trust in which the Client is interested, or if there is only one Statutory Trust, that fact;
        (iii) that the Client is subject to the protection conferred by the Client Money Rules and as a consequence:
        (A) this Money will be held separate from Money belonging to the Authorised Person; and
        (B) in the event of the Authorised Person's insolvency, winding up or other Pooling Event stipulated by the Regulator, the Client's Money will be subject to the Client Money Distribution Rules;
        (iv) whether interest is payable to the Client and, if so, on what terms;
        (v) if applicable, that the Client Money may be held in a jurisdiction outside the Abu Dhabi Global Market and the market practices, insolvency and legal regime applicable in that jurisdiction may differ from the regime applicable in the Abu Dhabi Global Market;
        (vi) if applicable, details about how any Client Money arising out of Islamic Financial Business is to be held;
        (vii) if applicable, that the Authorised Person holds or intends to hold the Client Money in a Client Account with a Third-Party Agent which is in the same Group as the Authorised Person; and
        (viii) details of any rights which the Authorised Person may have to realise Client Money held on behalf of the Client in satisfaction of a default by the Client or otherwise, and of any rights which the Authorised Person may have to close out or liquidate contracts or positions in respect of any of the Client's Investments.

      • COBS 14.2.11 COBS 14.2.11 Client Reporting

        (a) In relation to a Client to whom the Client Money Rules are applicable, an Authorised Person conducting Investment Business must send a statement to a Retail Client at least monthly or in the case of a Professional Client or Market Counterparty, at other intervals as agreed in writing with the Professional Client or Market Counterparty.
        (b) The statement must include:
        (i) the Client's total Client Money balances held by the Authorised Person reported in the currency in which the Client Money is held, or the relevant exchange rate if not reported in the currency in which the Money is held;
        (ii) the amount, date and value of each credit and debit paid into and out of the account since the previous statement; and
        (iii) any interest earned or charged on the Client Account since the previous statement.
        (c) The statement sent to the Client must be prepared within one calendar month of the statement date.

        • Guidance

          Authorised Persons conducting Payment Services must report to Payment Service Users in accordance with Chapter 19.

      • COBS 14.2.12 Reconciliation

        (a) An Authorised Person conducting Investment Business must maintain a system to ensure that accurate reconciliations of the Client Accounts are carried out as regularly as necessary but at least every calendar month.
        (b) The reconciliation must include:
        (i) a full list of individual Segregated Client credit ledger balances, as recorded by the Authorised Person;
        (ii) a full list of individual Segregated Client debit ledger balances, as recorded by the Authorised Person;
        (iii) a full list of unpresented cheques and outstanding lodgements;
        (iv) a full list of Client Account cash book balances; and
        (v) formal statements from Third-Party Agents showing account balances as at the date of reconciliation.
        (c) An Authorised Person must:
        (i) reconcile the individual credit ledger balances, Client Account cash book balances, and the Third-Party Agent Client Account balances;
        (ii) check that the balance in the Client Accounts as at the close of business on the previous Business Day was at least equal to the aggregate balance of individual credit ledger balances as at the close of business on the previous day; and
        (iii) ensure that all shortfalls, excess balances and unresolved differences, other than differences arising solely as a result of timing differences between the accounting systems of the Third-Party Agent and the Authorised Person, are investigated and, where applicable, corrective action is taken as soon as possible.
        (d) An Authorised Person must perform the reconciliations in (c) within ten Business Days of the date to which the reconciliation relates.
        (e) When performing the reconciliations, an Authorised Person must:
        (i) include in the credit ledger balances:
        (A) unallocated Client Money;
        (B) dividends received and interest earned and allocated;
        (C) sale proceeds which have been received by the Authorised Person and the Client has delivered the Investments or the Authorised Person holds or controls the Investment; and
        (D) Money paid by the Client in respect of a purchase where the Authorised Person has not remitted the Money to the counterparty or delivered the Investment to the Client; and
        (ii) deduct from the credit ledger balances:
        (A) Money owed by the Client in respect of unpaid purchases by or for the Client if delivery of those Investments has been made to the Client; and
        (B) Money remitted to the Client in respect of sales transactions by or for the Client if the Client has not delivered the Investments.
        (f) When performing reconciliations, an Authorised Person must maintain a clear separation of duties to ensure that an employee with responsibility for operating Client Accounts, or an employee that has the authority to make payments, does not perform the reconciliations under (a) to (d).
        (g) Reconciliation performed in accordance with (a) to (d) must be reviewed by a member of the Authorised Person who has adequate seniority.
        (h) The individual referred to in (g) must provide a written statement confirming the reconciliation has been undertaken in accordance with the requirements of this section.
        (i) The Authorised Person must notify the Regulator where there has been a material discrepancy with the reconciliation which has not been rectified.
        (j) A material discrepancy includes discrepancies which have the cumulative effect of being material, such as longstanding discrepancies.

      • COBS 14.2.13 Auditor's Reporting Requirements

        An Authorised Person engaged in Investment Business which holds Client Money for Segregated Clients must arrange for a Client Money Auditor's Report to be submitted to the Regulator on an annual basis.

      • COBS 14.2.14 Segregation and portability

        (a) Pursuant to section 4 of FSMR, an Authorised Person acts as trustee for all Client Money or Relevant Money, as applicable, received or held by it for the benefit of the Clients or Payment Service Users, as applicable, for whom that Client Money or Relevant Money is held, according to their respective interests in the relevant Statutory Trust.
        (b) In line with MIR 4.12, an Authorised Person that is also a Clearing Member of a Recognised Clearing House, shall offer Clients whose Client Money or Safe Custody Assets are rehypothecated or re-used to fund margin at a Recognised Clearing House in relation to Client transactions, the choice to clear their positions through an Omnibus Client Account ("Omnibus Client Segregation") or an individually segregated Client Account ("Individual Client Segregation") maintained by the Authorised Person with that Recognised Clearing House.
        (c) When a Client chooses Individual Client Segregation, any margin in excess of the Client's requirement shall also be transferred to the Recognised Clearing House and distinguished from the margins of other Clients of the Authorised Person and shall not be exposed to losses connected to positions recorded in another account.
        (d) To segregate Client Money (that would otherwise be held in a single Statutory Trust as the general pool of Client Money held for all Clients of the Authorised Person) for a specific Client or group of Clients clearing positions through a particular Client account at a Recognised Clearing House, a Clearing Member firm may, in accordance with these rules, create a separate Statutory Trust for Client Money receivables relating to a particular Client Account at that Recognised Clearing House (as in Rule 14.2.15).
        (e) An Authorised Person which creates a separate Statutory Trust as in (d), must notify all its Clients that it operates more than one Statutory Trust and must inform each Client of which Statutory Trust their Client Money forms part of and how it is identified.
        (f) The principles of this Rule will apply equally to any positions or margin at a Non-Abu Dhabi Global Market Clearing House subject to such derogations and waivers as the Regulator may prescribe.

      • COBS 14.2.15 Statutory Trusts

        (a) An Authorised Person receives and holds Client Money or Relevant Money, as applicable, as trustee in accordance with the following requirements.
        (b) The requirements in (a) are:
        (i) for the purposes of and on the terms of the Client Money rules and the Client Money Distribution Rules;
        (A) where an Authorised Person maintains only a single Statutory Trust as a general pool of Client Money or Relevant Money, as applicable, subject to (ii), for the Clients or Payment Service Users for whom that money is held, according to their respective interests in it;
        (B) where an Authorised Person has established one or more separate Statutory Trusts of Client Money, subject to (ii), each separate Statutory Trust is held for the Clients of the Authorised Person who are beneficiaries of that specific Statutory Trust according to their respective interests in it;
        (ii) for the payment of the costs properly attributable to the distribution of the Client Money or Relevant Money, as applicable, in accordance with (i), if such distribution takes place following the Failure of the Authorised Person; and
        (iii) after all valid claims and costs under (i) to (ii) have been met, for the Authorised Person itself.
        (c) In respect of Authorised Persons conducting Investment Business, the beneficiaries of each separate Statutory Trust are those Clients:
        (i) to whom the Authorised Person has delivered a Statutory Trust disclosure document under Rule 14.2.14(e);
        (ii) for whom the Authorised Person maintains, previously maintained or is in the process of establishing a margined transaction(s) in the relevant Client Account at the relevant Recognised Clearing House;
        (iii) who are interested in a Designated Client Fund Account or Designated Client Account; or
        (iv) to whom any Client Equity Balance or other Client Money is required to be segregated for the Client by the Authorised Person in respect of the margined transactions under (ii) from that separate Statutory Trust.
        (d) An Authorised Person which is subject to the Client Money Rules receives and holds Client Money or Relevant Money, as applicable, as trustee on the terms in Rule 14.2.14(d), subject to its obligations to hold Client Money as trustee.

      • COBS 14.2.16 Primary Pooling Event

        Following a Primary Pooling Event, an Authorised Person must comply with Rule 14.3.7 and all Client Money or Relevant Money, as applicable, will be subject to such Rules.

      • COBS 14.2.17 Client Disclosure

        (a) If an Authorised Person holds or controls money for a Market Counterparty which is not subject to these Client Money Rules, it must disclose to that Market Counterparty in writing that:
        (i) the protections conferred by the Client Money Rules do not apply to such money;
        (ii) such money may be mixed with money belonging to the Authorised Person, and may be used by the Authorised Person in the course of the Authorised Person's business; and
        (iii) following a Pooling Event, it will be an unsecured creditor.
        (b) The Authorised Person must obtain that Market Counterparty's written acknowledgement of the disclosures made prior to holding or controlling Client Money for that Market Counterparty.

      • COBS 14.2.18 Record Keeping

        (a) An Authorised Person must maintain records:
        (i) which enable the Authorised Person to demonstrate compliance with these Rules;
        (ii) which enable the Authorised Person to demonstrate and explain all entries of Client Money held or controlled in accordance with these Rules; and
        (iii) of all cheques relating to Client Money received and forwarded.
        (b) Records must be kept for a minimum of six years.
        (c) An Authorised Person must maintain proper books and accounts based on the double- entry booking principle. They must be legible, up to date and contain narratives with the entries which identify and provide adequate information about each transaction. Entries must be made in chronological order and the current balance must be shown on each of the Authorised Person's ledgers.

      • COBS 14.2.19 Notification of Failure to Comply

        An Authorised Person must inform the Regulator in writing without delay if it has not complied with, or is unable, in any material respect, to comply with the requirements in this Rule 14.2.

    • COBS 14.3 COBS 14.3 Client Investments

      • COBS 14.3.1 Application

        (a) An Authorised Person must treat all Investments held or controlled on behalf of a Client in the course of, or in connection with, the carrying on of Investment Business as Client Investments.
        (b) An Authorised Person which holds or controls Client Investments must have systems and controls in place to ensure the proper safeguarding of Client Investments.
        (c) Instead of safeguarding Client Investments, an Authorised Person may choose to safeguard Client Money equal to the value of the Client Investments.
        (d) An Authorised Person:
        (i) holding or controlling Client Investments;
        (ii) Providing Custody; or
        (iii) Arranging Custody
        in or from the Abu Dhabi Global Market must do so in accordance with the Safe Custody Provisions in Chapter 15, except in relation to Client Investments held as Collateral (unless stated otherwise).

      • COBS 14.3.2 Holding Collateral

        Before an Authorised Person holds Collateral from a Client it must disclose to that Client:

        (a) the basis and any terms governing the way in which the Collateral will be held, including any rights which the Authorised Person may have to realise the Collateral;
        (b) if applicable, that the Collateral will not be registered in that Client's own name;
        (c) if applicable, that the Authorised Person proposes to return to the Client Collateral other than the original Collateral or original type of Collateral; and
        (d) that in the event of the Authorised Person's Failure:
        (i) of an Abu Dhabi Global Market Firm, any excess Collateral will be sold and the resulting Client Money shall be distributed in accordance with the Client Money Distribution Rules; or
        (ii) of a Non-Abu Dhabi Global Market Firm, that Collateral will be subject to a regime which may differ from the regime applicable in the Abu Dhabi Global Market.
        (e) Before an Authorised Person deposits Client's Collateral with a third party it must notify and obtain the agreement of the third party that:
        (i) the Collateral does not belong to the Authorised Person and must therefore be held by the third party in a segregated Client Account in a name that clearly identifies it as belonging to the Authorised Person's Clients; and
        (ii) the third party is not entitled to claim any lien or right of retention or sale over the Collateral except to cover the obligations owed to the third party arising on the segregated Client Account and no other account.
        (f) An Authorised Person may permit Client's Collateral to be held by a third party only where it has reasonable grounds to believe that the third party is, and remains, suitable to hold that Collateral.
        (g) An Authorised Person must be able to demonstrate to the Regulator's satisfaction the grounds upon which it considers the third party to be suitable to hold Client's Collateral.
        (h) An Authorised Person must take reasonable steps to ensure that the Collateral is properly safeguarded.
        (i) An Authorised Person must withdraw the Collateral from the third party where the Collateral is not being properly safeguarded unless the Client has indicated otherwise in writing.
        (j) An Authorised Person holding Client's Collateral must send a statement every six months to the Client.
        (k) An Authorised Person must reconcile the Client's Collateral in accordance with Rule 15.9.

      • COBS 14.3.3 Information to prime brokerage Clients

        (a) An Authorised Person must make available to each of its Clients to whom it provides prime brokerage services a statement in a durable medium:
        (i) showing the value at the close of each Business Day of the items in Rule 14.3.4 below; and
        (ii) detailing any other matters which that Authorised Person considers are necessary to ensure that a Client has up-to-date and accurate information about the amount of Client Money and the value of Safe Custody Assets held by that Authorised Person for it.
        (b) The statement must be made available to those Clients not later than the close of the next Business Day to which it relates.
        Amended on (3 February, 2020).

      • COBS 14.3.4

        The statement must include:

        (a) the total value of Safe Custody Assets and the total amount of Client Money held by that prime brokerage firm for a Client;
        (b) the cash value of each of the following:
        (i) cash loans made to that Client and accrued interest;
        (ii) securities to be redelivered by that Client under open short positions entered into on behalf of that Client;
        (iii) current settlement amount to be paid by that Client under any futures contracts;
        (iv) short sale cash proceeds held by the Authorised Person in respect of short positions entered into on behalf of that Client;
        (v) cash margin held by the Authorised Person in respect of open futures contracts entered into on behalf of that Client;
        (vi) mark-to-market close-out exposure of any OTC transaction entered into on behalf of that Client secured by Safe Custody Assets or Client Money;
        (vii) total secured obligations of that Client against the prime brokerage firm; and
        (viii) all other Safe Custody Assets held for that Client.
        (c) total collateral held by the Authorised Person in respect of secured transactions entered into under a prime brokerage agreement, including where the Authorised Person has exercised a right of use in respect of that Client's Safe Custody Assets;
        (d) the location of all of a Client's Safe Custody Assets, including assets held with a sub-custodian; and
        (e) a list of all the institutions at which the Authorised Person holds or may hold Client Money, including money held in Client Accounts.

      • COBS 14.3.5

        The reports under Rule 15.8 below must also be provided to each Client, to the extent that this is required under this section.

      • COBS 14.3.6 Record Keeping

        (a) An Authorised Person must maintain records which enable the Authorised Person to demonstrate compliance with this section; and which enable the Authorised Person to demonstrate and explain all entries of Client Investments and Collateral held or controlled in accordance with this chapter.
        (b) Records must be kept for a minimum of six years.

      • COBS 14.3.7 Notification of Failure to Comply

        An Authorised Person must inform the Regulator in writing without delay if it has not complied with, or is unable, in any material respect, to comply with the requirements in this Rule 14.3.

    • COBS 14.4 COBS 14.4 Client Money Distribution Rules

      • COBS 14.4.1 COBS 14.4.1 Application

        (a) To the extent that the rules in this section ("the Client Money Distribution Rules") are inconsistent with section 233 of the Insolvency Regulations, these Rules will prevail.
        (b) This chapter applies to an Authorised Person that holds Client Money which is subject to the Client Money rules when a Pooling Event occurs.

        • Guidance

          1. This section seeks to facilitate the timely return of Client Money to Clients or Relevant Money to Payment Service Users, as applicable, in the event of the Failure of an Authorised Person or third party at which the Authorised Person holds Client Money or Relevant Money, as applicable.
          2. Following a Pooling Event, an Authorised Person must sell all non-cash assets representing the proceeds of, or directly traceable from, Client Money and use the proceeds of the sale to satisfy claims of Statutory Trust beneficiaries made in accordance with this chapter.
          3. Relevant Money held by an Authorised Person conducting Payment Services is intended to be treated in the same manner as Client Money pursuant to the Client Money Distribution Rules, in terms of its segregation for the purposes of distribution to Payment Service Users following a Primary Pooling Event or a Secondary Pooling Event. Distribution of Relevant Money subject to a Statutory Trust is intended to occur either in accordance with the balances in the respective Payment Accounts of Payment Service Users, or alternatively to be used for the purpose of redemption of Stored Value held by Payment Service Users.

      • COBS 14.4.2 COBS 14.4.2 Primary Pooling Events

        (a) If the Authorised Person becomes insolvent, and there is (for whatever reason) a shortfall in Client Money or Relevant Money, as applicable, in a particular Statutory Trust, the available funds will be distributed in accordance with the Client Money Distribution Rules.
        (b) A Primary Pooling Event occurs:
        (i) on the Failure of an Authorised Person;
        (ii) on the vesting of assets in a trustee in accordance with an Assets Requirement imposed under section 38 of FSMR; or
        (iii) if the Regulator makes an order or decision to this effect under FSMR;
        (iv) when the Authorised Person notifies, or is in breach of its duty to notify, the Regulator, in accordance with Rules 14.2.12(i), 14.2.19, 14.3.7, 15.9.5 and 16.2.15 that it is unable correctly to identify and allocate in its records all valid claims arising as a result of a Secondary Pooling Event.
        (c) Rule (b)(iv) does not apply so long as:
        (i) the Authorised Person is taking steps, in consultation with the Regulator, to establish those records; and
        (ii) there are reasonable grounds to conclude that the records will be capable of rectification within a reasonable period.

        • Guidance

          A Primary Pooling Event triggers a notional pooling of all the Client Money or Relevant Money, as applicable, in every type of Client Account, and the obligation to distribute it.

      • COBS 14.4.3 COBS 14.4.3 Pooling and distribution

        (a) If a Primary Pooling Event occurs, an Authorised Person must comply with (b) to (g) below.
        (b) The following Client Money is included in a separate Statutory Trust under Rule 14.2.14(d):
        (i) the Authorised Person's receivables in respect of any Client Money held in a Client Account of the Authorised Person relating to that separate Statutory Trust; and
        (ii) the Authorised Person's receivables in respect of any Client Money held in a Client Account of the Authorised Person relating to that separate Statutory Trust, except in respect of Client Money held in a Client Account at a Recognised Clearing House, a Remote Clearing House or a Clearing Member which is, in either case, held as part of a Clearing Member Client Contract under FSMR;
        (c) In respect of the general Statutory Trust (i.e., the Statutory Trust in respect of the general pool of Client Money held for all Clients of the Authorised Person or held for residual Clients not interested in a Designated Client Account, Designated Client Fund Account or specific Statutory Trust under Rule 14.2.14), the following is treated as a single notional pool of Client Money for the beneficiaries of the general pool:
        (i) the Authorised Person's receivables in respect of any Client Money held in any Client Account of the Authorised Person;
        (ii) the Authorised Person's receivables in respect of any Client Money held in a Client Account of the Authorised Person, except for Client Money held in a Client Account at a Recognised Clearing House or Remote Clearing House, or a Clearing House which is, in either case, held as part of a Clearing Member Client Contract under FSMR; and
        (iii) the Authorised Person's receivables in respect of any Client Money identifiable in any other account held by the Authorised Person into which Client Money has been received;
        except, in each case, for Client Money relating to a separate Statutory Trust which falls under (b).
        (d) The Authorised Person must:
        (i) distribute Client Money in accordance with Rule 14.2.15, so that each Client who is a beneficiary of each separate Statutory Trust receives a sum which is rateable to the Client Money entitlement and calculated in accordance with Rule 14.4.3(n) relating to each Client's Client Equity Balance; or
        (ii) (where applicable) transfer Client Money held at a Recognised Clearing House, Remote Clearing House or Non-ADGM Clearing House to effect or facilitate porting of positions held for the Clients who are beneficiaries of that separate Statutory Trust.
        (e) If, in connection with a Clearing Member Client Contract, Client Money is remitted directly to the Authorised Person from a Recognised Clearing House, a Remote Clearing House or from a Clearing Member thereof, then:
        (i) any such remittance in respect of a Client Account constituting a separate Statutory Trust under Rule 14.2.15 must be distributed to the relevant Client interested in such Client Account subject to Rule 14.2.15(d); and
        (ii) subject to (i), any such remittance in respect of any other Client Account must form part of the relevant Statutory Trust under (b) and be subject to distribution accordingly.
        (f) Where any Asset is valued by a Recognised Clearing House, the close-out price or valuation of the Recognised Clearing House shall apply on a Pooling Event, regardless of the actual time of close-out, provided that the Recognised Clearing House or Remote Clearing House has acted in accordance with its Default Rules.
        (g) [Deleted]
        (h) Where an Authorised Person that is a Clearing Member of a Recognised Clearing House or Remote Clearing House defaults, the Recognised Clearing House or Remote Clearing House may:
        (i) port Client positions and related collateral (including proceeds of Client Money or Safe Custody Assets) where possible; and
        (ii) after the completion of the default management process:
        (A) return any balance due directly to those Clients for whom the positions are held, if they are known to the Recognised Clearing House or Remote Clearing House; or
        (B) remit any balance to the Authorised Person for the account of its Clients if the Clients are not known to the Recognised Clearing House or Remote Clearing House.
        (i) Where an Authorised Person acting in connection with a Clearing Member Client Contract for a Client (who is also an indirect Client) defaults, the Clearing Member with whom the Authorised Person has placed Client Moneyof the indirect Client, may:
        (i) transfer the positions and assets either to another Clearing Member of the relevant Recognised Clearing House or Remote Clearing House, or to another Authorised Person willing to act for the indirect Client; or
        (ii) liquidate the Assets and positions of the indirect Clients and remit all monies due to the indirect Clients.
        (j) Where any balance remitted from a Recognised Clearing House or Remote Clearing House (or in the case of the Authorised Person being an indirect Client, a Clearing Member) to an Authorised Person is Client Money, (k) provides for the distribution of remittances from either an Individual Client Account or an Omnibus Client Account.
        (k) Remittances received by the Authorised Person falling within (e) should not be pooled with Client Money held in any Client Account operated by the Authorised Person at the time of the Primary Pooling Event. Those remittances should be segregated and promptly distributed to each Client on whose behalf the remittance was received.
        (l) [Deleted]
        (m) [Deleted]
        (n) Each Client's Client Equity Balance must be reduced by:
        (i) any amount paid by:
        (A) a Clearing House to a Clearing Member other than the Authorised Person in connection with a porting arrangement where Client Money is ported by the Recognised Clearing House or Remote Clearing House as part of the default management process of that Recognised Clearing House or Remote Clearing House;
        (B) a Clearing Member to another Clearing Member or Authorised Person (other than the Authorised Person) in connection with a Clearing Member Client Contract where Client Money is paid to the Client or a duly authorised representative of the Client;
        (ii) any amount paid by:
        (A) a Recognised Clearing House or Remote Clearing House directly to that Client, where the amount comprises the balance owed by the Recognised Clearing House or Remote Clearing House after the completion of the Clearing Member's default management process by the Recognised Clearing House or Remote Clearing House; and
        (B) a Clearing Member directly to an indirect Client in accordance with default management procedures adopted by the Clearing Member.
        (iii) any amount that must be distributed to that Client by the Authorised Person in accordance with(e)(i) and (ii).
        (o) When, in respect of a Client who is a beneficiary of a Statutory Trust, there is a positive individual Client balance and a negative Client Equity Balance in relation to that Statutory Trust, the credit for that Statutory Trust must be offset against the debit reducing the individual Client balance for that Client.
        (p) When, in respect of a Client who is a beneficiary of a Statutory Trust, there is a negative individual Client Equity Balance and a positive Client Equity Balance in relation to that Statutory Trust, the credit for that Statutory Trust must be offset against the debit for that Statutory Trust reducing the Client Equity Balance for that Client.

        • COBS 14.4.3 Guidance

          1. For the avoidance of doubt, 'relevant Clients' in the case of (e) includes any entitlement of a Client held by it for a Person who is an indirect client.
          2. For the avoidance of doubt, in respect of a Clearing Member Client Contract, any Client Money remitted by the Recognised Clearing House or Remote Clearing House (or in the case of the Authorised Person being an indirect Client, a Clearing Member) to the Authorised Person pursuant to (e) should not be treated as Client Money received after the Failure of the Authorised Person under Rule 14.4.4.
          3. The Authorised Person's obligation to its Client in respect of Client Money relating to a particular Statutory Trust is discharged where the Authorised Person, to facilitate porting transfers, or the transfer of that Client Money to a Clearing Member in connection with a Clearing Member Client Contract and the Clearing Member, remits payment to another Authorised Person or to another Clearing Member where the Client Money is paid to the Client or a duly authorised representative of the Client.

      • COBS 14.4.4 COBS 14.4.4 Client money received after the Failure of the Authorised Person

        (a) Subject to Rule 14.4.3, Client Money received by the Authorised Person after a Primary Pooling Event in respect of a Statutory Trust must not be pooled with Client Money held in any Client Account operated by the Authorised Person either in respect of that Statutory Trust or any other Statutory Trust at the time of the Primary Pooling Event. Such Client Money must instead be placed in a Client Account that has been opened after that event and must be handled in accordance with the requirements in Rule 14.2, and returned to the relevant Client(s) without delay, except to the extent that:
        (i) it is Client Money relating to a transaction that has not settled at the time of the Primary Pooling Event; or
        (ii) it is Client Money relating to a Client, for whom the Client Equity Balance, calculated in accordance with Rules 14.4.3(n), 14.4.3(o) and 14.4.3(p), shows that Money is due from the Client to the Authorised Person at the time of the Primary Pooling Event.
        (b) [Deleted]
        (c) If an Authorised Person receives a mixed remittance after a Primary Pooling Event, it must:
        (i) pay the full sum into the separate Client Account opened in accordance with (a); and
        (ii) pay the money that is not Client Money out of that Client Account into an Authorised Person's own account within one Business Day of the day on which the Authorised Person would normally expect the remittance to be cleared.
        (d) Whenever possible the Authorised Person should seek to split a mixed remittance before the relevant accounts are credited.
        (e) If both a Primary Pooling Event and a Secondary Pooling Event occur, the provisions of this section relating to a Primary Pooling Event apply.

        • Guidance

          Client Money received after the Primary Pooling Event relating to an unsettled transaction should be used to settle that transaction. Examples of such transactions include:
          (i) an equity transaction with a trade date before the date of the Primary Pooling Event and a settlement date after the date of the Primary Pooling Event; or
          (ii) a contingent liability investment that is 'open' at the time of the Primary Pooling Event and is due to settle after the Primary Pooling Event.

      • COBS 14.4.5 COBS 14.4.5 Secondary Pooling Events

        (a) A Secondary Pooling Event occurs on Failure of a third party to which Client Money or Relevant Money, as applicable, held by the Authorised Person has been transferred under Rule 14.2.5(a) or Rule 14.2.9 and the Authorised Person has not repaid to its Clients or Payment Service Users, or paid into a Client Account at an unaffected bank, an amount equivalent to the shortfall in the amount of Client Money or Relevant Money, as applicable, held by the third party.
        (b) The Authorised Person would be expected to reflect the shortfall in (a) in itsrecords of the entitlement of Clients and of Client Money, or Payment Service Users and Relevant Money, as applicable, held with third parties under Rules 14.2.18, 14.3.6 and 14.3.7.

        • Guidance

          1. These Rules in relation to Secondary Pooling Events seek to ensure that Clients who have previously specified that their Client Money be placed in a Designated Client Account at a different bank, should not suffer the loss of a different bank that has Failed.
          2. When Client Money is transferred to a third party, an Authorised Person continues to owe fiduciary duties to the Client. Whether an Authorised Person is liable for a shortfall in Client Money caused by the Failure of a third party will depend on whether it has complied with its duty of care as agent or trustee.

      • COBS 14.4.6 Failure of third parties: pooling and distribution

        (a) This section applies to third parties, which includes:
        (i) a bank (where one or more general Client Accounts are held under one or more Statutory Trusts or separate Statutory Trusts); and
        (ii) an intermediate broker, settlement agent or OTC counterparty.
        (b) If a Secondary Pooling Event occurs as a result of the Failure of such a third party where one or more Client Accounts are held under different Statutory Trusts, then:
        (i) in relation to every Client Account of the Authorised Person maintained in respect of a particular Statutory Trust, Rule 14.4.7 will apply.
        (c) Money held in each general Client Account of the Authorised Person under a Statutory Trust or separate Statutory Trusts must be treated as pooled into a single Statutory Trust ("the relevant pool") and:
        (i) any shortfall in Client Money or Relevant Money held, or which should have been held in the general Client Accounts for the relevant pool, that has arisen as a result of the Failure of the third party, must be borne by all the Clients or Payment Service Users, as applicable, of that relevant pool, rateably in accordance with their entitlements;
        (ii) a new Client Money or Relevant Money entitlement, as applicable, must be calculated for each Client or Payment Service User, as applicable, of the relevant pool to reflect the requirements in (i), and the Authorised Person's records must be amended to reflect the reduced Client Money or Relevant Money entitlement;
        (iii) the Authorised Person must make and retain a record of each Client's or Payment Service User’s share of the shortfall of Client Money or Relevant Money, as applicable, at the Failed third party until the Client or Payment Service User, as applicable, is repaid; and
        (iv) the Authorised Person must use the new Client Money or Relevant Money entitlements, calculated in accordance with (ii), for the purposes of reconciliations pursuant to Rules 14.2.12(a) to 14.2.12(d) for the relevant Clients in (ii).
        (d) The term "which should have been held" is a reference to the Failed third party's Failure to hold the Client Money or Relevant Money, as applicable, at the time of the Pooling Event.
        (e) Any Client Money held under a particular Statutory Trust, in relation to a Designated Client Account at a third party (other than the Failed third party) is not pooled with any other Client Money held in that particular Statutory Trust or any other Statutory Trusts.
        (f) Any Client Money held under a Statutory Trust, no part of which is at the Failed third party, is not pooled with any Client Money of other affected Statutory Trusts.
        (g) [Deleted]
        (h) Any shortfall in Client Money or Relevant Money held under a particular Statutory Trust affected by a Secondary Pooling Event must be borne by all the Clients or Payment Service Users whose Client Money or Relevant Money, as applicable, is held in such a Statutory Trust, rateably in accordance with their Client Money or Relevant Money entitlements.
        (i) A new Client Money or Relevant Money entitlement, as applicable, must be accordingly and the Authorised Person's records must be amended to reflect each Client's or Payment Service User’s new Client Money or Relevant Money entitlement, as applicable.
        (j) the Authorised Person must make and retain a record of each Client's or Payment Service User’s share of the Client Money or Relevant Money shortfall at the Failed third party until the Client or Payment Service Useris repaid; and
        (k) the Authorised Person must use the new Client Money or Relevant Money entitlements, calculated in accordance with (h), for the purposes of reconciliations pursuant to Rules 14.2.12(a) to 14.2.12(d) for the relevant Statutory Trust(s).
        (l) A Client whose Money was held, or which should have been held, in a Designated Client Account or Designated Client Fund with a Failed third party is not entitled to claim in respect of that Money against any other Client Account of the Authorised Person.

      • COBS 14.4.7 Client Money received after the Failure of a third party

        (a) Client Money or Relevant Money received by the Authorised Person after the Failure of a third party, that would otherwise have been paid into a Client Account at that Failed third party:
        (i) must, if Client Money, not be transferred to the Failed third party unless specifically instructed by the Client in order to settle an obligation of that Client to the Failed third party; and
        (ii) must, if Client Money, be, subject to (i), placed in a separate Client Account:
        (A) on the written instruction of the Client, transferred to a third party other than the one that has Failed; or
        (B) returned to the Client as soon as possible.
        (iii) must, if Relevant Money, be placed in a separate Client Account maintained with a third party other than the one which has Failed.
        (b) If an Authorised Person receives a mixed remittance after the Secondary Pooling Event which consists of Client Money that would have been paid into a Client Account, a Designated Client Account or a Designated Client Fund Account maintained at the third party that has Failed, it must:
        (i) pay the full sum into a Client Account other than one operated at the Failed third party; and
        (ii) pay the money that is not Client Money out of that Client Account within one Business Day of the day on which the Authorised Person would normally expect the remittance to be cleared.
        (c) Whenever possible the Authorised Person should seek to split a mixed remittance before the relevant accounts are credited.

      • COBS 14.4.8 Notification to the Regulator

        (a) On the Failure of a Third Party with which Client Money or Relevant Money is held, the Authorised Person must notify the Regulator:
        (i) as soon as it becomes aware of the Failure of any bank, intermediate broker, settlement agent, OTC counterparty or other entity with which it has placed, or to which it has passed, Client Money or Relevant Money; and
        (ii) as soon as reasonably practical, whether it intends to make good any shortfall that has arisen or may arise and of the amounts involved.