1This chapter applies as follows:2

1. (1)

   CASS 9.2 and CASS 9.3 apply to a prime brokerage firm2to which CASS 6 (Custody rules) applies;

   2
2. (2)

   subject to paragraphs4 (3) and (4), CASS 9.4 and CASS 9.5 apply 2to a firm to which either or both CASS 6 (Custody rules) and CASS 7 (Client money rules) applies; 2

   32
3. (3)

   2CASS 9.4 and CASS 9.5 do 2not apply to a firm which only arranges safeguarding and administration of assets; and4

   2
4. (4)

   2for a firm to which CASS 7 (client money rules) applies as well as either or both of CASS 5 (Client money: insurance mediation activity) and CASS 11 (Debt management client money chapter) apply, this chapter does not apply to client money that a firm holds in accordance with CASS 5 or CASS 11.

1. (1)

   1A firm must make available to each of its clients to whom it provides prime brokerage services a statement in a durable medium:

   1. (a)

      showing the value at the close of each business day of the items in (3); and

   2. (b)

      detailing any other matters which that firm 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 firm for it.

2. (2)

   The statement must be made available to those clients not later than the close of the next business day to which it relates.

3. (3)

   The statement must include:

   1. (a)

      the total value of safe custody assets and the total amount of client money held by that prime brokerage firm for a client;

   2. (b)

      the cash value of each of the following:

      1. (i)

         Cash loans made to that client and accrued interest;

      2. (ii)

         securities to be redelivered by that client under open short positions entered into on behalf of that client;

      3. (iii)

         current settlement amount to be paid by that client under any futures contracts;

      4. (iv)

         short sale cash proceeds held by the firm in respect of short positions entered into on behalf of that client;

      5. (v)

         cash margin held by the firm in respect of open futures contracts entered into on behalf of that client;

      6. (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;

      7. (vii)

         total secured obligations of that client against the prime brokerage firm; and

      8. (viii)

         all other safe custody assets held for that client.

   3. (c)

      total collateral held by the firm in respect of secured transactions entered into under a prime brokerage agreement, including where the firm has exercised a right of use in respect of that client'ssafe custody assets;

   4. (d)

      the location of all of a client'ssafe custody assets, including assets held with a sub-custodian; and

   5. (e)

      a list of all the institutions at which the firm holds or may hold client money, including money held in client bank accounts and client transaction accounts.

1. (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. (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'ssafe 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. (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.

1A firm that holds custody assets or client money must:

1. (1)

   provide the information in COBS 6.1.7 R for any custody assets the firm may hold for a client, including any custody assets which are not designated investments; and

2. (2)

   provide the information in COBS 6.1.7 R and in (1) to each of its clients.

When a firm receives a request, made by a client, or on a client's behalf, for a statement of the custody assets and/or client money that the firm holds for that client, the firm must provide the client with the statement requested in a durable medium.

When a firm receives a request, made by a client, or on a client's behalf, for a copy of any statement of custody assets and/or client money previously provided to that client, the firm must provide the client with the copy of the statement requested in a durable medium and within five business days following the receipt of the request.

Any charge agreed between the firm and the client for providing the statements in CASS 9.5.4 R and CASS 9.5.5 R must reasonably correspond to the firm's actual costs.