Home   Browse contents   View updates   Search  
     Quick search
Go
   

Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
Laws
Rulebook Modules
Conduct of Business Module (COB) [VER33/07-19]
Sourcebook Modules
Consultation Papers
Policy Statements
DFSA Codes of Practice
Amendments to Legislation
Media Releases
Notices
Financial Markets Tribunal
Archive

BackText onlyPrint

You need the Flash plugin.

Download Macromedia Flash Player



  • COB App 6 Safe Custody Provisions

    • COB A6.1 Application

      • COB A6.1.1

        This appendix applies to an Authorised FirmG in accordance with COB Rule 6.13.3.

        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DFSA RM66/2009 (Made 1st August 2009). [VER16/08-09]

    • COB A6.2 General Requirements

      • COB A6.2.1

        The provisions of this appendix are referred to as the Safe Custody ProvisionsG .

        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

      • COB A6.2.2

        An Authorised FirmG must:

        (a) comply with the Safe Custody ProvisionsG ; and
        (b) have adequate systems and controls in place to be able to evidence compliance with the Safe Custody ProvisionsG .
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DFSA RM66/2009 (Made 1st August 2009). [VER16/08-09]

    • COB A6.3 Recording, Registration and Holding Requirements

      • COB A6.3.1

        An Authorised FirmG which Provides CustodyG or holds or controls Client InvestmentsG must ensure that Safe Custody InvestmentsG are recorded, registered and held in an appropriate manner to safeguard and control such property.

        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DFSA RM66/2009 (Made 1st August 2009). [VER16/08-09]

      • COB A6.3.2

        Subject to COB Rule A6.4.1, an Authorised FirmG which Provides CustodyG or holds or controls Client InvestmentsG must record, register and hold Safe Custody InvestmentsG separately from its own InvestmentsG .

        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DFSA RM66/2009 (Made 1st August 2009). [VER16/08-09]

    • COB A6.4 Client Accounts in relation to Client Investments

      • COB A6.4.1

        An Authorised FirmG which Provides CustodyG or holds or controls Client InvestmentsG must register or record all Safe Custody InvestmentsG in the legal title of:

        (a) a Client AccountG ; or
        (b) the Authorised FirmG where, due to the nature of the law or market practice, it is not feasible to do otherwise.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DFSA RM66/2009 (Made 1st August 2009). [VER16/08-09]

      • COB A6.4.2

        A Client AccountG in relation to Client InvestmentsG is an account which:

        (a) is held with a Third Party AgentG or by an Authorised FirmG which is authorised under its LicenceG to Provide CustodyG ;
        (b) is established to hold Client AssetsG ;
        (c) when held by a Third Party AgentG , is maintained in the name of;
        (i) if a Domestic FirmG , the Authorised FirmG ; or
        (ii) if not a Domestic FirmG , a Nominee CompanyG controlled by the Authorised FirmG ; and
        (d) includes the words 'Client Account' in its title.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DFSA RM66/2009 (Made 1st August 2009). [VER16/08-09]

      • COB A6.4.3

        (1) An Authorised FirmG must maintain a master list of all Client AccountsG .
        (2) The master list must detail:
        (a) the name of the account;
        (b) the account number;
        (c) the location of the account;
        (d) whether the account is currently open or closed; and
        (e) the date of opening or closure.
        (3) The details of the master list must be documented and maintained for a minimum period of six years following the closure of an account.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

        • COB A6.4.3 Guidance

          1. An Authorised FirmG may record, register or hold a Client'sG InvestmentG in a Client AccountG solely for that ClientG . Alternatively, an Authorised FirmG may choose to pool that Client'sG InvestmentG in a Client AccountG containing InvestmentsG of more than one ClientG .
          2. The purpose of recording, registering or holding InvestmentsG in a Client AccountG is to ensure that InvestmentsG belonging to ClientsG are readily identifiable from InvestmentsG belonging to the Authorised FirmG such that, following a Distribution EventG , any subsequent distribution of InvestmentsG may be made in proportion to each Client'sG valid claim over those InvestmentsG .
          3. Following a Distribution EventG , a ClientG may not have a valid claim over InvestmentsG registered, recorded or held in a Client AccountG if that Client AccountG was not established to register, record or hold InvestmentsG for that ClientG or a pool of ClientsG of which that ClientG was a part.
          Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
          [Amended] DFSA RM66/2009 (Made 1st August 2009). [VER16/08-09]

      • COB A6.4.4

        An Authorised FirmG must not use a Client'sG Safe Custody InvestmentG for its own purpose or that of another PersonG without that Client'sG prior written permission.

        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DFSA RM66/2009 (Made 1st August 2009). [VER16/08-09]

      • COB A6.4.5

        An Authorised FirmG which intends to use a Client'sG Safe Custody InvestmentsG for its own purpose or that of another PersonG , must have systems and controls in place to ensure that:

        (a) it obtains that Client'sG prior written permission;
        (b) adequate records are maintained to protect Safe Custody InvestmentsG which are applied as collateral or used for stock lending activities;
        (c) the equivalent assets are returned to the Client AccountG of the ClientG ; and
        (d) the ClientG is not disadvantaged by the use of his Safe Custody InvestmentsG .
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

    • COB A6.5 Holding or Arranging Custody with Third Party Agents

      • COB A6.5.1

        (1) Before an Authorised FirmG holds a Safe Custody InvestmentG with a Third Party AgentG , it must undertake an assessment of that Third Party AgentG and have concluded on reasonable grounds that the Third Party AgentG is suitable to hold those Safe Custody InvestmentsG .
        (2) An Authorised FirmG must have systems and controls in place to ensure that the Third Party AgentG remains suitable.
        (3) When assessing the suitability of the Third Party AgentG , the Authorised FirmG must ensure that the Third Party AgentG will provide protections equivalent to the protections conferred in this appendix.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DSFA RM185/2016 (Made 7th December 2016). [VER28/02-17]

      • COB A6.5.1A

        (1) Before an Authorised FirmG arranges custody with a non-DIFC custodian authorised and supervised by a Financial Services RegulatorG , it must undertake an assessment of that custodian and have concluded, on reasonable grounds, that it is suitable to hold the Safe Custody InvestmentsG .
        (2) When assessing the suitability of a non-DIFC custodian, the Authorised FirmG must ensure that the non-DIFC custodian will provide protections equivalent to the protections conferred in this appendix.
        Derived from DSFA RM185/2016 (Made 7th December 2016). [VER28/02-17]

      • COB A6.5.2

        An Authorised FirmG must be able to demonstrate to the DFSA's satisfaction the grounds upon which the Authorised FirmG considers the Third Party AgentG or a non-DIFC custodian to be suitable to hold Safe Custody InvestmentsG .

        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DSFA RM185/2016 (Made 7th December 2016). [VER28/02-17]

        • COB A6.5.2 Guidance

          When assessing the suitability of a Third Party AgentG , an Authorised FirmG should have regard to:

          a. its credit rating;
          b. its capital and financial resources in relation to the amount of Safe Custody InvestmentsG held;
          c. the insolvency regime of the jurisdiction in which it is located;
          d. its arrangements for holding the InvestmentsG ;
          e. its regulatory status, expertise, reputation and history;
          f. its GroupG structure;
          g. its use of agents and service providers; and
          h. any other activities of the agent.
          Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

    • COB A6.6 Safe Custody Agreements with Third Party Agents

      • COB A6.6.1

        Before an Authorised FirmG passes, or permits to be passed, Safe Custody InvestmentsG to a Third Party AgentG it must have procured a written acknowledgement from the Third Party AgentG stating:

        (a) that the title of the account sufficiently distinguishes that account from any account containing InvestmentsG belonging to the Authorised FirmG , and is in the form requested by the Authorised FirmG ;
        (b) that the Client InvestmentG will only be credited and withdrawn in accordance with the instructions of the Authorised FirmG ;
        (c) that the Third Party AgentG will hold Client InvestmentsG separately from assets belonging to the Third Party AgentG ;
        (d) the arrangements for recording and registering Client InvestmentsG , claiming and receiving dividends and other entitlements and interest and the giving and receiving of instructions;
        (e) that the Third Party AgentG will deliver a statement to the Authorised FirmG (including the frequency of such statement), which details the Client InvestmentsG deposited to the account;
        (f) that all InvestmentsG standing to the credit of the account are held by the Authorised FirmG as agent and that the Third Party AgentG is not entitled to combine the account with any other account or to exercise any charge, mortgage, lien, right of set-off or counterclaim against InvestmentsG in that account in respect of any sum owed to it on any other account of the Authorised FirmG ; and
        (g) the extent of liability of the Third Party AgentG in the event of default.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DFSA RM66/2009 (Made 1st August 2009). [VER16/08-09]

      • COB A6.6.2

        (1) An Authorised FirmG must maintain records of all Safe Custody AgreementsG and any instructions given by the Authorised FirmG to the Third Party AgentG under the terms of the agreement.
        (2) The records must be maintained for at least of six years.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

    • COB A6.7 Client Disclosure

      • COB A6.7.1

        (1) Before an Authorised Firm Arranges CustodyG for a ClientG it must disclose to that ClientG , if applicable, that the Client'sG Safe Custody InvestmentsG may be held in a jurisdiction outside the DIFC and the market practices, insolvency and legal regime applicable in that jurisdiction may differ from the regime applicable in the DIFC.
        (2) Before an Authorised Firm Provides CustodyG for a ClientG it must disclose to the ClientG on whose behalf the Safe Custody InvestmentsG will be held:
        (a) a statement that the ClientG is subject to the protections conferred by the Safe Custody ProvisionsG ;
        (b) the arrangements for recording and registering Safe Custody InvestmentsG , claiming and receiving dividends and other entitlements and interest and the giving and receiving instructions relating to those Safe Custody InvestmentsG ;
        (c) the obligations the Authorised FirmG will have to the ClientG in relation to exercising rights on behalf of the ClientG ;
        (d) the basis and any terms governing the way in which Safe Custody InvestmentsG will be held, including any rights which the Authorised FirmG may have to realise Safe Custody InvestmentsG held on behalf of the ClientG in satisfaction of a default by the ClientG ;
        (e) the method and frequency upon which the Authorised FirmG will report to the ClientG in relation to his Safe Custody InvestmentsG ;
        (f) if applicable, a statement that the Authorised FirmG intends to mix Safe Custody InvestmentsG with those of other ClientsG ;
        (g) if applicable, a statement that the Client'sG Safe Custody InvestmentsG may be held in a jurisdiction outside the DIFC and the market practices, insolvency and legal regime applicable in that jurisdiction may differ from the regime applicable in the DIFC;
        (h) if applicable, a statement that the Authorised FirmG holds or intends to hold Safe Custody InvestmentsG in a Client AccountG with a Third Party AgentG which is in the same GroupG as the Authorised FirmG ; and
        (i) the extent of the Authorised Firm'sG liability in the event of default by a Third Party AgentG .
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

    • COB A6.8 Client Reporting

      • COB A6.8.1

        (1) An Authorised FirmG which Provides CustodyG or which holds or controls Client InvestmentsG for a ClientG must send a statement to a Retail ClientG at least every six months or in the case of a Professional ClientG at other intervals as agreed in writing with the Professional ClientG .
        (2) The statement must include:
        (a) a list of that Client'sG Safe Custody InvestmentsG as at the date of reporting;
        (b) a list of that Client'sG CollateralG and the market value of that CollateralG as at the date of reporting; and
        (c) details of any Client MoneyG held by the Authorised FirmG as at the date of reporting.
        (3) The statement sent to the ClientG must be prepared within 25 business days of the statement date.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DFSA RM66/2009 (Made 1st August 2009). [VER16/08-09]

    • COB A6.9 Reconciliation

      • COB A6.9.1

        An Authorised FirmG must:

        (a) at least every 25 business days, reconcile its records of Client AccountsG held with Third Party AgentsG with monthly statements received from those Third Party AgentsG ;
        (b) at least every six months, count all Safe Custody InvestmentsG physically held by the Authorised FirmG , or its Nominee CompanyG , and reconcile the result of that count to the records of the Authorised FirmG ; and
        (c) at least every six months, reconcile individual ClientG ledger balances with the Authorised Firm'sG records of Safe Custody InvestmentG balances held in Client AccountsG .
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DFSA RM66/2009 (Made 1st August 2009). [VER16/08-09]

      • COB A6.9.2

        An Authorised FirmG must ensure that the process of reconciliation does not give rise to a conflict of interest.

        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

        • COB A6.9.2 Guidance

          An AuthorisedG firm should maintain a clear separation of duties to ensure that an employee with responsibility for operating Client AccountsG , or an employee that has authority over Safe Custody InvestmentsG , should not perform the reconciliations under COB Rule A6.9.1.

          Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

      • COB A6.9.3

        (1) Reconciliation performed in accordance with COB section A6.9 must be reviewed by a member of the Authorised FirmG who has adequate seniority.
        (2) The individual referred to in (1) must provide a written statement confirming that the reconciliation has been undertaken in accordance with the requirements of this section.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DFSA RM66/2009 (Made 1st August 2009). [VER16/08-09]

      • COB A6.9.4

        The Authorised FirmG must notify the DFSA where there have been material discrepancies with the reconciliation which have not been rectified.

        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

        • COB A6.9.4 Guidance

          A material discrepancy includes discrepancies which have the cumulative effect of being material, such as longstanding discrepancies.

          Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

    • COB A6.10 Auditor's Reporting Requirements

      • COB A6.10 Guidance

        In accordance with GEN chapter 8, an Authorised FirmG to which this appendix applies must arrange for a Safe Custody Auditor's ReportG to be submitted to the DFSA on an annual basis.

        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DFSA RM66/2009 (Made 1st August 2009). [VER16/08-09]