Client Assets (Part II)

Question 1

A member may accept from or hold uncertificated equity securities or funds intended for the purchase of equity securities for a client for safekeeping. Who must control such assets?

Answer 1

An authorised CSP.

Question 2

Before accepting equity securities and funds from a controlled client for custody, what is a member required to obtain from a client and where must it be recorded?

Answer 2

1. The arrangements must be recorded in a written mandate incorporating the minimum requirements as prescribed by the JSE.
2. Electronic acceptance or signed acceptance of the mandate by the client.
3. In a custody mandate register.

Question 3

What is a CSP required to do regarding the safeguarding of controlled clients’ equity securities?

Answer 3

1. 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.
2. Pre-validate equity securities in terms of generally accepted market practice.
3. Dematerialise equity securities that are eligible to be dematerialised in terms of the processes required by the member’s CSDP.
4. 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.

Question 4

When is dematerialisation of equity securities complete?

Answer 4

When notification has been received by the member’s CSDP that the equity securities are available for electronic settlement.

Question 5

A CSP that controls a nominee register must balance the equity securities with the securities custody account at the CSDP on a daily basis. 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?

Answer 5

1. 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.
2. 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
3. No circumstances have arisen that have resulted in the improper use of controlled clients’ equity securities.

Question 6

What is a CSP required to do when it receives certificated equity securities from a controlled client?

Answer 6

Forthwith issue a dated and signed receipt recording the:
1. Name.
2. Quantity.
3. Certificate number.
4. Registered holder of the equity security.

Question 7

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?

Answer 7

1. The CSP must record those securities in the nominee register as being collateral for a loan.
2. If a pledge is required by the member the CSP must keep a record or register of the pledges held.