COB 6.11 COB 6.11 Client Assets
COB 6.11.1 COB 6.11.1(1) This section applies to an
Authorised Firmwhich:(a) holds or controls Client Assets; or(b) Provides Custody.(2) This section applies to an Authorised Firm Arranging Custodyonly to the extent specified in COB Rule 6.11.2(3).
COB 6.11.1 Guidance1.
Client Assetsis defined in the GLO Module as "Client Money and Client Investments".2. Principle 9 of the Principles for Authorised Firms (Customer assets and money) requires an Authorised Firmto arrange proper protection for Clients' Assetswhen the firm is responsible for them. An essential part of that protection is that an Authorised Firmmust properly safeguard Client Moneyand Client Investmentsheld or controlled on behalf of a Clientin the course of, or in connection with, the carrying on of Investment Businessin or from the DIFC.3. COB Rule 6.11.3 requires an Authorised Firmto introduce adequate organisational arrangements to minimise the risk of the loss or diminution of Client Assets, or of rights in connection with Client Assets, as a result of, for example, the Authorised Firm'sor a third party's insolvency, fraud, poor administration, inadequate recordkeeping or negligence.4. For information about the difference between Providing Custodyand Arranging Custody, see Guidance under GEN Rule 184.108.40.206. The Client Asset provisions apply only to a limited extent to an Authorised Firmthat Arranges Custody, as such a firm does not hold or control Client Assets(see COB Rule 6.11.2(3)).6. If an Authorised Firm is Providing Money Services, the Client Asset provisions apply to funds or other assets it receives from a User (i.e. a payer or payee), or that are for the benefit of a User.
COB 6.11.2 COB 6.11.2(1) An
Authorised Firmwhich holds or controls Client Moneymust comply with sections 6.12 and 6.14.(2) An Authorised Firmwhich holds or controls Client Investmentsor Provides Custodymust comply with sections 6.13 and 6.14.(3) An Authorised Firm which Arranges Custody must comply with the requirements in COB Rule A6.5.1A (on suitability of non-DIFC custodians) and A6.7.1(1) (on disclosure) in APP 6 and in section 6.14 (Record keeping).
COB 6.11.2 Guidance1. An Authorised Firm subject to COB Rule 6.11.2(1) will include an ATS Operator, where it holds or controls Client Money.2. Where an Authorised Firm holds or controls Client Investments which are Investment Tokens, or Provides Custody in relation to Investment Tokens, it must comply with the requirements in COB section 14.3 (in addition to those in COB sections 6.13 and 6.14).Derived from DFSA RMI311/2021 (Made 30th June 2021). [VER39/10-21]
COB 6.11.3 COB 6.11.3(1) An
Authorised Firmmust have systems and controls to ensure that Client Assetsare identifiable and secure at all times.(2) Where the Authorised Firmholds a mandate, or similar authority over an account with a third party, in the Client'sown name, its systems and controls must:(a) include a current list of all such mandates and any conditions placed by the Clientor by the Authorised Firmon the use of the mandate;(b) include the details of the procedures and authorities for the giving and receiving of instructions under the mandate; and(c) ensure that all Transactionsentered into using such a mandate are recorded and are within the scope of the authority of the Employeeand the Authorised Firmentering into such Transactions.Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
Holding or Controlling Client Assets
COB 6.11.4 COB 6.11.4
Assetsare held or controlled by an Authorised Firmif they are:(a) directly held by the Authorised Firm;(b) held in an account in the name of the Authorised Firm;(c) held by a Person, or in an account in the name of a Person, controlled by the Authorised Firm; or(d) held in the Client's own name, but the Authorised Firmhas a mandate from the Clientto manage those assets on a discretionary basis.
COB 6.11.4 Guidance1
Forthe purposes of COB Rule 6.11.4, the DFSA would consider a Personto be controlled by an Authorised Firmif that Personis inclined to act in accordance with the instructions of the Authorised Firm.2. The DFSA would consider an account to be controlled by an Authorised Firmif that account is operated in accordance with the instructions of the Authorised Firm.3. If an Authorised Firmhas a discretionary portfolio mandate from a Client, even though the assets are to be held in the name of the Client(for example, under a power of attorney arrangement), the firm controls those assets as it can execute transactions relating to those assets, within the parameters set out in the mandate.4. In relation to assets referred to in Guidance item 3 that are held in the Client'sname, only specific Rulesin App 5 (Client Money Provisions) and App 6 (Safe Custody Provisions) are likely to be relevant, as the assets are al held in the Client'sown name and the firm will control rather than hold the assets. A firm with such a discretionary mandate will also need to comply with other relevant requirements in the Rulebook, such as GEN Rule 2.2.10A requiring an endorsement to hold or control Client Assets, and GEN 8.6 section requiring an audit report relating to Client Assets.5. If an Authorised Firm is Providing Money Services, funds or assets that it receives from, or that are for the benefit of, a User will be Client Assets held or controlled by the firm.