Entire Section
GEN 2.14 GEN 2.14 Arranging custody
GEN 2.14.1
In GEN Rule 2.2.2
Arranging Custody means arranging for one or morePersons to carry on the activity described in GEN Rule 2.13.1 (Providing Custody).
Derived from DFSA RM01/2004 (Made 16th September 2004). [VER1/09-04]
[Amended] DFSA RM184/2016 (Made 7th December 2016). [VER38/02-17]Exclusions
GEN 2.14.2
A
Person (an 'introducer') does not carry on the activity ofArranging Custody specified in GEN Rule 2.14.1 merely by introducing anotherPerson to a custodian who is anAuthorised Firm or aRegulated Financial Institution authorised to provide custody. This exclusion does not apply if:(a) the custodian is a member of the sameGroup as the introducer;(b) the custodian is a part of the same legal entity as the introducer and, conducts custody services outside theDIFC ; or(c) the introducer is remunerated for making the introduction by anyPerson , including by an entity referred to in (a) or (b).Derived from DFSA RM01/2004 (Made 16th September 2004). [VER1/09-04]
Amended in accordance with Notice of Amendments to Legislation April 2011 [VER27/02-11]
[Amended] DFSA RM184/2016 (Made 7th December 2016). [VER38/02-17]GEN 2.14.3 GEN 2.14.3
An
Exchange does notArrange Custody merely by making arrangements for, or taking steps that facilitate:(a) the safeguarding and administration of assets belonging toMembers or other participants for the purposes of AMI section 5.10; or(b) the settlement by anotherPerson of transactions entered into on a facility operated by theExchange .Derived from DFSA RM166/2016 (Made 10th February 2016). [VER36/04-16]GEN 2.14.3 Guidance
How does Providing Custody differ from Arranging Custody?
1. Refer to Guidance item 2 underProviding Custody in GEN section 2.13.Activities which constitute arranging
2. The type of activities that constituteArranging Custody include:a. negotiating and settling terms of the contract between the custody provider and thePerson who is obtaining that service (theClient );b. assisting theClient to complete application forms and other processes;c. collecting and processing theClient's payments; andd. transmitting information (including instructions from theClient and confirmations by the custody provider) between theCustomer and the custody provider.Non-application of the Client Asset provisions
3. TheClient Asset provisions only apply to firms holding or controllingClient Assets and to firmsProviding Custody . As a firmArranging Custody does not 'safeguard and administerInvestments ' (see Guidance items 3 and 4 underProviding Custody in GEN section 2.13), theClient Asset provisions in COB section 6.11 have only limited application to such a firm (see COB Rule 6.11.2(3)). The requirement for aSafe Custody Auditor's Report under GEN Rule 8.6.1(e) also does not apply to a firmArranging Custody .4. A firm 'Arranging Custody ', although not subject to substantiveClient Asset provisions (because it does not hold or controlClient Assets ), is still required to undertake due diligence on a non-DIFC custodian with whom it arranges for itsClient to obtain custody services — see COB Rule A6.5.1A.Who can rely on the exclusion in GEN Rule 2.14.2
5. The exclusion in GEN Rule 2.14.2 is available to an introducer who introduces a potential customer to a regulated firm. However, this exclusion does not apply if the introducer:a. is a member of the sameGroup as the custodian;b. is part of the same legal entity as the custodian (i.e. the custodian is the introducer's head office or another branch of the same legal entity as the introducer); orc. receives remuneration for making the introduction from any Person — which can be a related party referred to in a. or b. above or any unrelated party.Derived from DFSA RM184/2016 (Made 7th December 2016). [VER38/02-17]