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MiFID II 

Client money 

24 March 2011

Impact Red traffic light

Amber traffic light
High impact for firms taking title transfer of retail client assets


Medium impact, some systems/operational changes may be necessary

Other areas to consider

Client assets

Current MiFID rules

Segregation

A firm has a duty when holding client money to safeguard the clients’ rights and, except in the case of credit institutions, prevent the use of client funds for its own account.

Exemptions from the requirement to segregate:

  • Title transfer arrangements where full ownership of funds has been transferred to a investment firm to cover any client obligations,
  • Where the firm carries on business in its own name on behalf of the client, where that is required by the very nature of the transaction and the client is in agreement.

Depositing money with a third party:

  • Firms are required to place client funds into accounts opened with a central bank or a credit institution or certain money mark funds and, except for central banks, to exercise all due skill, care and diligence in the selection and review of institutions they choose.

MiFID Level 1 Directive Arts: 13(8) of MiFID; Recitals 25 and 27

MiFID Level 2 Directive Art: 18(1)

FSA rules

CASS 7

Proposed changes
Draft Directive

Recital (37)
Article 16(10)

In response to recent cases where ownership of assets has been disputed as a result of poor rules/practices, the Commission is proposing that: title transfer arrangements are prohibited when dealing with retail client assets.

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