CASS 9.3 Prime brokerage agreement disclosure annex

CASS 9.3.1R01/03/2011

(1)
1A firm must ensure that every prime brokerage agreement that includes its right to use safe custody assets for its own account includes a disclosure annex.
(2)
A firm must ensure that the disclosure annex sets out a summary of the key provisions within the prime brokerage agreement permitting the use of safe custody assets, including:
1. (a)
  the contractual limit, if any, on the safe custody assets which a prime brokerage firm is permitted to use;
2. (b)
  all related contractual definitions upon which that limit is based;
3. (c)
  a list of numbered references to the provisions within that prime brokerage agreement which permit the firm to use the safe custody assets; and
4. (d)
  a statement of the key risks to that client's safe custody assets if they are used by the firm, including but not limited to the risks to the safe custody assets on the failure of the firm.
(3)
A firm must ensure that it sends to the client in question an updated disclosure annex if the terms of the prime brokerage agreement are amended after completion of that agreement such that the original disclosure annex no longer accurately records the key provisions of the amended agreement.

CASS 9.3.2G03/01/2018

(1)
Principle 10 (Clients’ assets) requires a firm to arrange adequate protection for client's assets when it is responsible for them. As part of these protections, the custody rules require a firm to take appropriate steps to protect safe custody assets for which it is responsible.
(2)
Subject to paragraph (3), a 3 prime brokerage firm should not enter into “right to use arrangements” for a client's safe custody assets unless:1
3
1. (a)
  in the case of a CASS small firm or a firm to which CASS 1A.3.1C R applies2, the person in that firm to whom the responsibilities set out in CASS 1A.3.1 R or in CASS 1A.3.1C R (2) respectively2 have been allocated; or1
2. (b)
  in the case of any other firm, the person who carries out the CASS operational oversight function; and1
3. (c)
  those of that firm’s managers who are responsible for those safe custody assets;
  are each satisfied that the firm has adequate systems and controls to discharge its obligations under Principle 10 which include (where applicable)3:1
  1. (i)
    the daily reporting obligation in CASS 9.2.1 R; and1
  2. (ii)
    the record-keeping obligations in CASS 6.3.6AR4.1
(3)
Paragraph (2) does not apply where the prime brokerage firm is also acting as trustee or depositary of an AIF which is an unauthorised AIF and exercises a right of reuse for a safe custody asset of that unauthorised AIF under FUND 3.11.24 R (Reuse of assets).3

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