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 more Persons 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 of Arranging Custody specified in GEN Rule 2.14.1 merely by introducing another Person to a custodian who is an Authorised Firm or a Regulated Financial Institution authorised to provide custody. This exclusion does not apply if:

        (a) the custodian is a member of the same Group as 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).
        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 not Arrange Custody merely by making arrangements for, or taking steps that facilitate:

        (a) the safeguarding and administration of assets belonging to Members or other participants for the purposes of AMI section 5.10; or
        (b) the settlement by another Person of 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 Custody in GEN section 2.13.

          Activities which constitute arranging

          2. The type of activities that constitute Arranging Custody include:
          a. negotiating and settling terms of the contract between the custody provider and the Person who is obtaining that service (the Client);
          b. assisting the Client to complete application forms and other processes;
          c. collecting and processing the Client's payments; and
          d. transmitting information (including instructions from the Client and confirmations by the custody provider) between the Customer and the custody provider.

          Non-application of the Client Asset provisions

          3. The Client Asset provisions only apply to firms holding or controlling Client Assets and to firms Providing Custody. As a firm Arranging Custody does not 'safeguard and administer Investments' (see Guidance items 3 and 4 under Providing Custody in GEN section 2.13), the Client 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 a Safe Custody Auditor's Report 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 Asset provisions (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 Client 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 same Group 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); or
          c. 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]