GEN 2.14 GEN 2.14 Arranging custody
Person(an 'introducer') does not carry on the activity of Arranging Custodyspecified in GEN Rule 2.14.1 merely by introducing another Personto a custodian who is an Authorised Firmor a Regulated Financial Institutionauthorised to provide custody. This exclusion does not apply if:(a) the custodian is a member of the same Groupas the introducer;(b) the custodian is a part of the same legal entity as the introducer and, conducts custody services outside the DIFC; or(c) the introducer is remunerated for making the introduction by any Person, including by an entity referred to in (a) or (b).
GEN 2.14.3 GEN 2.14.3
Exchangedoes not Arrange Custodymerely by making arrangements for, or taking steps that facilitate:(a) the safeguarding and administration of assets belonging to Membersor other participants for the purposes of AMI section 5.10; or(b) the settlement by another Personof transactions entered into on a facility operated by the Exchange.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 under
Providing Custodyin GEN section 2.13.
Activities which constitute arranging2. The type of activities that constitute
Arranging Custodyinclude:a. negotiating and settling terms of the contract between the custody provider and the Personwho is obtaining that service (the Client);b. assisting the Clientto complete application forms and other processes;c. collecting and processing the Client'spayments; andd. transmitting information (including instructions from the Clientand confirmations by the custody provider) between the Customerand the custody provider.
Non-application of the Client Asset provisions3. The
Client Assetprovisions only apply to firms holding or controlling Client Assetsand to firms Providing Custody. As a firm Arranging Custodydoes not 'safeguard and administer Investments' (see Guidance items 3 and 4 under Providing Custodyin GEN section 2.13), the Client Assetprovisions in COB section 6.11 have only limited application to such a firm (see COB Rule 6.11.2(3)). The requirement for a Safe Custody Auditor'sReport under GEN Rule 8.6.1(e) also does not apply to a firm Arranging Custody.4. A firm ' Arranging Custody', although not subject to substantive Client Assetprovisions (because it does not hold or control Client Assets), is still required to undertake due diligence on a non-DIFC custodian with whom it arranges for its Clientto obtain custody services — see COB Rule A6.5.1A.
Who can rely on the exclusion in GEN Rule 2.14.25. 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 same
Groupas 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]