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]