CASS 7A.2 Primary pooling events

A primary pooling event occurs:

1. (1)

   on the failure of the firm;

2. (2)

   on the vesting of assets in a trustee2 in accordance with an 'assets requirement' imposed under section 55P(1)(b) or (c) (as the case may be) of the Act;

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3. (3)

   on the coming into force of a requirement for all client money held by the firm; or

4. (4)

   when the firm notifies, or is in breach of its duty to notify, the FCA, in accordance with CASS 7.6.16 R (Notification requirements), that it is unable correctly to identify and allocate in its records all valid claims arising as a result of a secondary pooling event.

CASS 7A.2.2R (4) does not apply so long as:

1. (1)

   the firm is taking steps, in consultation with the FCA, to establish those records; and

2. (2)

   there are reasonable grounds to conclude that the records will be capable of rectification within a reasonable period.

4If a primary pooling event occurs in circumstances where the firm had, before the primary pooling event, reduced its margined transaction requirement by utilising approved collateral under CASS 7 Annex 1 paragraph 15, it must immediately liquidate this approved collateral and place the proceeds in a client bank account .

4CASS 7A.2.7 R (Client money received after the failure of the firm) does not apply to the proceeds under CASS 7A.2.3A R.

If a primary pooling event occurs, then4:

1. (1)
   1. (a)

      in respect of a sub-pool,4 the following is treated as a single notional pool of client money for the beneficiaries of that pool:45

      1. (i)

         any client money held in a client bank account of the firm relating to that sub-pool; and5

      2. (ii)

         any client money held in a client transaction account of the firm relating to that sub-pool, except for client money held in a client transaction account at an authorised central counterparty3 or a clearing member which is, in either case, held as part of a 4regulated clearing arrangement;5

   2. (b)

      in respect of the general pool, the following is treated as a single notional pool of client money for the beneficiaries of the general pool:5

      1. (i)

         any client money held in any client bank account of the firm;5

      2. (ii)

         any client money held in a client transaction account of the firm, except for client money held in a client transaction account at an authorised central counterparty, or a clearing member which is, in either case, held as part of a regulated clearing arrangement; and5

      3. (iii)

         any client money identifiable in any other account held by the firm into which client money has been received;5

      except, in each case, for client money relating to a sub-pool which falls under (1)(a)(i) or (ii).5

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2. (2)

   the firm must :4

   4
   1. (a)

      4distribute client money comprising a notional pool in accordance with CASS 7.7.2 R , so that each client who is a beneficiary of that pool receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7A.2.5 R; or

   2. (b)

      4(where applicable) transfer client money comprising a sub-pool to effect or facilitate porting of positions held for the clients who are beneficiaries of that sub-pool; and

3. (3)

   1if, in connection with a regulated clearing arrangement, client money is remitted directly to the firm 3either from an authorised central counterparty3 or from a clearing member , then:

   1. (a)

      any such remittance in respect of a client transaction account that is an individual client account must be distributed to the relevant client subject to CASS 7.7.2R (4) ;

   2. (b)

      subject to (3)(c) and (d)4, any such remittance in respect of a client transaction account that is an omnibus client account must form part of the notional pool 4 under CASS 7A.2.4R (1) and be subject to distribution in accordance with CASS 7A.2.4R (2);

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   3. (c)

      any such remittance in respect of a client transaction account that is an omnibus client account must be distributed to the3 relevant clients for whom that omnibus client account is held if:

      1. (i)

         no client money in excess of the amount recorded in that omnibus client account is held by the firm as margin in relation to the positions recorded in that omnibus client account; and4

      2. (ii)

         the amount of such remittance attributable to each client of the omnibus client account is readily apparent from information provided to the firm 4 by the authorised central counterparty3 or, in the case of indirect clients, the clearing member;

         4

      in which case the amount of such remittance must be distributed to each such client in accordance with the information provided by the authorised central counterparty 3or clearing member subject to CASS 7.7.2R (4) ; and4

   4. (d)

      4any such remittance in respect of a client transaction account that is a net margined omnibus client account in respect of which the firm maintains a sub-pool must form part of such sub-pool to be distributed in accordance with CASS 7A.2.4R (2)(a).

1. (-1)

   1Each client's client equity balance must be reduced by:

   1. (a)

      any amount paid by:

      3
      1. (i)

         an authorised central counterparty to a clearing member other than the firm in connection with a porting arrangement in accordance with CASS 7.2.15R (6) in respect of that client;

      2. (ii)

         a clearing member to another clearing member or firm (other than the firm) in connection with a transfer in accordance CASS 7.2.15R (8);

   2. (b)

      any amount paid by:

      3
      1. (i)

         an authorised central counterparty directly to that client, in accordance withCASS 7.2.15R (7); and

      2. (ii)

         3a clearing member directly to an indirect client in accordance CASS 7.2.15R (9); and

   3. (c)

      any amount that must be distributed to that client by the firm in accordance with CASS 7A.2.4R (3)(a) or (c).

2. (1)

   When, in respect of a client who is a beneficiary of a pool4, there is a positive individual client balance 4 and a negative client equity balancein relation to that pool4, the credit for that pool 4must be offset against the debit reducing the individual client balance 4 for that client.

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3. (2)

   When, in respect of a client who is a beneficiary of a pool4, there is a negative individual client balance 4 and a positive client equity balance in relation to that pool4, the credit for that pool 4must be offset against the debit for that pool 4reducing the client equity balance for that client.

Client money received by the firm after a primary pooling event in respect of a pool4 must not be pooled with client money held in any client money account operated by the firm either in respect of that pool or any other pool 4at the time of the primary pooling event. It must be placed in a client bank account that has been opened after that event and must be handled in accordance with the client money rules, and returned to the relevant client without delay, except to the extent that:

1. (1)

   it is client money relating to a transaction that has not settled at the time of the primary pooling event; or

2. (2)

   it is client money relating to a client, for whom the client money entitlement, calculated in accordance with CASS 7A.2.5 R, shows that money is due from the client to the firm at the time of the primary pooling event.

If a firm receives a mixed remittance after a primary pooling event, it must:

1. (1)

   pay the full sum into the separate client bank account opened in accordance with CASS 7A.2.7 R; and

2. (2)

   pay the money that is not client money out of that client bank account into a firm's own bank account within one business day of the day on which the firm would normally expect the remittance to be cleared.

If both a primary pooling event and a secondary pooling event occur, the provisions of this section relating to a primary pooling event apply.