CASS 6.2 Holding of client assets

1A firm must, when holding financial instruments belonging to clients, make adequate arrangements so as to safeguard clients' ownership rights, especially in the event of the firm's insolvency, and to prevent the use of financial instruments belonging to a client on the firm's own account except with the client's express consent.

[Note: article 13(7) of MiFID]

A firm must introduce adequate organisational arrangements to minimise the risk of the loss or diminution of clients' financial instruments, or the rights in connection with thosefinancial instruments, as a result of the misuse of the financial instruments, fraud, poor administration, inadequate record-keeping or negligence.

[Note: article 16(1)(f) of the MiFID implementing Directive]

To the extent practicable, a firm must effect appropriate registration or recording of legal title to a financial instrument in the name of:

1. (1)

   the client (or, where appropriate, the trustee firm), unless the client is an authorised person acting on behalf of its client, in which case it may be registered in the name of the client of that authorised person;

2. (2)

   a nominee company which is controlled by:

   1. (a)

      the firm;

   2. (b)

      an affiliated company;

   3. (c)

      a recognised investment exchange or a designated investment exchange; or

   4. (d)

      a third party with whom financial instruments are deposited under CASS 6.3;

3. (3)

   any other third party if:

   1. (a)

      the financial instrument is subject to the law or market practice of a jurisdiction outside the United Kingdom and the firm has taken reasonable steps to determine that it is in the client's best interests to register or record it in that way, or that it is not feasible to do otherwise, because of the nature of the applicable law or market practice; and

   2. (b)

      the firm has notified the client in writing;

4. (4)

   the firmif:

   1. (a)

      the financial instrument is subject to the law or market practice of a jurisdiction outside the United Kingdom and the firm has taken reasonable steps to determine that it is in the client's best interests to register or record it in that way, or that it is not feasible to do otherwise, because of the nature of the applicable law or market practice; and

   2. (b)

      the firm has notified the client if a professional client, or obtained prior written consent if a retail client.

A firm must accept the same level of responsibility to its client for any nominee company controlled by the firm with respect of any requirements of the custody rules.

A firm may register or record legal title to its own financial instrument in the same name as that in which legal title to a financial instrument is registered or recorded, but only if:

1. (1)

   the firm's financial instruments are separately identified in the firm's records from the financial instruments; or

2. (2)

   the firm registers or records a financial instrument in accordance with CASS 6.2.3R (4).

A firm must ensure that any documents of title to financial instruments in bearer form, belonging to the firm and which it holds in its physical possession, are kept separately from any document of title to a client's financial instrument in bearer form.