Client Assets Flashcards
Define “client assets”
JSE authorised investments safeguarded by a member on behalf of clients.
Define “controlled client account”
An account reflecting the equity securities and funds of a controlled client
What is a controlled client
Define “controlled client”
A client or an account holder on whose behalf a client is acting, whose funds and uncertificated equity securities are under the control of a CSP or whose settlements take place via the CSDP of a member.
“CSP”
A custody services provider.
“controlled client custody account”
EQUITY SECURITIES ACCOUNT with a CSDP IN THE NAME of the MEMBER’s NOMINEE COMPANY WHICH REFLECTS the
UNCERTIFICATED EQUITY SECURITIES balances of the member’s controlled clients and through which settlement of transactions in equity securities for such controlled clients is effected
“custody services”
The services provided by a custody services provider on behalf of its clients or another member and that member’s clients, in relation to the EXERCISING of CONTROL OVER UNCERTIFICATED EQUITY SECURITIES and FUNDS INTENDED for the PURCHASE of EQUITY SECURITIES, held by a member on behalf of controlled clients.
“custody services provider”
A member which has been authorised by the JSE to perform custody services in terms of the rules.
Define “JSE authorised investments” (7)
- equity securities;
- JSE listed securities traded on the JSE derivatives trading system or the Yield-X trading system;
- securities listed on an exchange in the republic other than the JSE;
- securities listed on an external exchange;
- participatory interests in a collective investment scheme as defined in the Collective Investment Schemes Control Act, 2002 (Act No.45 of 2002), and units or any other form of participation in a foreign collective investment scheme approved by the Registrar of Collective Investment Schemes in terms of section 65 of that Act;
- units or any other form of participation in a collective investment scheme licensed or registered in a foreign country; and
- funds intended for the purchase of such securities, units or participation.
Define “safeguarding”
Safeguarding means the activities performed by an authorised user –
(a) for the purposes of HOLDING SECURITIES or FUNDS in CUSTODY ON BEHALF OF ANOTHER PERSON; or
(b) where the AUTHORISED USER is ACCOUNTABLE TO ANOTHER PERSON FOR a THIRD PARTY’S HOLDING of SECURITIES or funds in CUSTODY ON BEHALF OF THAT OTHER PERSON, and includes the administration of matter incidental to those securities or funds
Who must controls uncertificated equity securities or funds intended for the purchase of equity
securities for a client for safekeeping?
An authorised CSP.
what is a member required to obtain from a controlled client and where must it be recorded?
- The arrangements must be recorded in a written mandate incorporating the minimum requirements as prescribed by the JSE.
- Electronic acceptance or signed acceptance of the mandate by the client.
- Recordede in a custody mandate register.
What is a CSP required to do regarding the safeguarding of controlled clients’ equity securities?
- Keep a nominee register, in terms of criteria prescribed by directive, of the controlled client equity securities that are being held from time to time. Full details of any change must be recorded forthwith in the nominee register.
- Pre-validate equity securities in terms of generally accepted market practice.
- Dematerialise equity securities that are eligible to be dematerialised in terms of the processes required by the member’s CSDP.
- The necessary details of all equity securities of a controlled client must be recorded and stored in a nominee register in the BDA system in a manner which will render it possible at any time thereafter to establish readily the identity of the person entitled to the ownership of those equity securities. Such equity securities must be held in a securities custody account with a CSDP.
When is dematerialisation of equity securities complete?
When notification has been received by the member’s CSDP that the equity securities are available for electronic settlement.
CSP that controls a nominee register must balance the equity securities
What must be confirmed in the monthly certificate to be furnished to the Director: Market
Regulation on the third business day after BDA month end?
- The equities securities balances in the nominee register have been agreed with the CSDP controlled client custody account balances or, if there are differences, explaining the reasons for such differences.
- The equities securities balances in the nominee register have been reconciled daily with the CSDP controlled client custody account balances and that all differences occurring during the month were either rectified within one day or if circumstances beyond the control of the CSP prevented any differences from being rectified within one day, those differences were rectified as soon as was reasonably possible; and
- No circumstances have arisen that have resulted in the improper use of controlled clients’ equity securities.
What is a CSP required to do when it receives certificated equity securities from a controlled client?
Forthwith issue a dated and signed receipt recording the:
1. Name.
2. Quantity.
3. Certificate number.
4. Registered holder of the equity security.
What is a member required to do if equity securities belonging to a controlled client are held as collateral in respect of a loan of funds or securities?
- The CSP must record those securities in the nominee register as being collateral for a loan.
- If a pledge is required by the member the CSP must keep a record or register of the pledges held.
What are the 2 rules which cater for the safeguarding of controlled clients’ funds?
- Funds received in respect of or arising from the operation of an account for a controlled client which are not paid over to the client upon receipt of such funds, must be deposited for the account and in the name of the client with JSET.
- The difference between the total of the funds balances on all controlled client accounts in the books of account of the member as at the close of business on the preceding business day and the total amount held by JSET on behalf of the clients of such member as at the same date must be paid to or received from JSET forthwith.
Before accepting certificated equity securities from a client for safekeeping, what is a member required to obtain from a client and where must it be recorded?
- The arrangements must be recorded in a written mandate containing the minimum requirements as prescribed by the JSE.
- Electronic acceptance or signed acceptance of the client.
- In a safe custody mandate register.
Itemise 4 control procedures in the rules relating to the safeguarding of clients’ certificated securities.
- The certificates must be marked with the necessary details recorded and stored in BDA to readily establish the identity of the owner.
- They must be protected from unauthorised access and misappropriation.
- No transfer deed may be attached until such securities are prepared for disposal or delivery.
- Name of issuer and number of shares must be inserted on the transfer deed before the registered owner signs for it.
- No blank signed transfer deeds may be retained.
- JSE must be satisfied that adequate insurance cover is held by the member.
- A signed receipt recording the name of the securities, number of securities and certificate number must be issued forthwith on receipt of the securities.
Before accepting clients’ assets other than equity securities for safekeeping or assuming the responsibility for accounting to a client, what is a member required to obtain from a client and where must it be recorded?
- The arrangements must be recorded in a written mandate containing the minimum requirements as prescribed by the JSE.
- Electronic acceptance or signed acceptance of the client.
- In a safe custody mandate register.
What are the requirements with which a member, who is responsible for clients’ assets other than equity securities, must comply?
- The relevant assets must be segregated from the member’s own assets at all times. If the assets are held in an account maintained by another financial services provider, including a foreign financial services provider, the account shall either be opened in the client’s own name or, if the member opens a single account in respect of transactions executed on behalf of more than one client, the member shall procure that the account is clearly designated in the records of the relevant financial services provider as being an account utilised for investments made by the member on behalf of its clients.
- A member must maintain proper accounting records in respect of all such assets purchased, sold or held on behalf of clients. These records must be updated forthwith in respect of any transactions in respect of such assets and must clearly identify the owners of all such assets at all times.
- A member must balance its clients’ holdings in such assets, as reflected in the member’s records, with the accounts maintained by the other financial services providers who hold such assets, on a monthly basis. Any differences identified between the respective records must be rectified forthwith.
- A member who is responsible for safeguarding client assets other than equity securities must implement and maintain an effective system of internal controls to protect such assets and prevent unauthorised access thereto.
What is a member required to do with margins and cash collateral?
Deposit the funds which have not been remitted in JSET for the account of the client for value on the date of receipt of such funds.
Clients funds may not be deposited in JSET for the sole purpose of earning interest. True or False?
True.
- What must a TSP do prior to entering into an arrangement with another member to act as its settlement agent?
AND - What may the agreement provide?
- Advise the JSE of its intention to do so.
- That the settlement agent:
a. Assists the TSP in meeting its obligations to ensure settlement of proprietary trades and trades executed on
behalf of non-controlled clients.
b. Monitors unsettled proprietary and non-controlled clients’ trades.
c. Institutes any action which is necessary to ensure the TSP meets its obligations to settle.
