• IMEB Part 3.3 IMEB Part 3.3 Treatment of client money and fiduciary duties

    • IMEB 3.3.1 Client money — creation of trust and terms of holding

      (1) Client money held by a firm is subject to a trust.
      (2) The firm is the trustee of the trust and holds the client money on the following terms:
      (a) that the money is held for the purposes, and on the terms, of the client money protection rules and client money distribution rules;
      (b) that, subject to paragraph (d), the money is held for clients (other than clients who are insurers and who are acting as such), according to their respective interests in it;
      (c) that, after all valid claims under paragraph (b) have been met, the money is held for insurers (that is, clients who are insurers acting as such), according to their respective interests in it;
      (d) that, on the failure of the firm, the money will also be held for the payment of costs attributable to the distribution of the client money in accordance with paragraphs (b) and (c);
      (e) that, after all valid claims and costs under paragraphs (b) to (d) have been met, the money is held for the firm itself.

      Note Client money is defined in rule 1.2.9. Client, client money protection rules and client money distribution rules are defined in the glossary.
      Derived from QFCRA RM/2011-3 (as from 1st July 2011)

    • IMEB 3.3.2 Fiduciary duties of firm

      (1) The fiduciary duties of a firm over client money continue until the money ceases to be client money under rule 3.6.2 (Certain payments out of client bank account to discharge fiduciary duties).

      Note Under rule 3.6.2 (1), client money that is paid out of a client bank account ceases to be client money if it is paid—
      (a) to the insurer for the client; or
      (b) to a client or a duly authorised representative of the client; or
      (c) on the instructions, or with the consent, of a client (other than a transfer of client money in accordance with rule 3.7.1 (When client money may be transferred to eligible intermediary); or
      (d) into a bank account in the client's own name (not being an account that is also in the name of the firm); or
      (e) to the firm for the firm's own account under rule 3.2.1 (Client money exception-money payable to firm); or
      (f) to the firm as surplus under rule 3.9.2 (b) (What to do if CM resource is not equal to CM requirement).
      (2) To avoid doubt, the fiduciary duties of a firm over client money do not cease if the money is transferred to an eligible intermediary under rule 3.7.1.

      Note To effect an insurance transaction for a client, a firm may, under rule 3.7.1, transfer, or permit to be transferred, to an eligible intermediary or a series of eligible intermediaries, client money belonging to the client.
      Derived from QFCRA RM/2011-3 (as from 1st July 2011)

    • IMEB 3.3.3 Accounting for client money

      (1) A firm must ensure that it can promptly and accurately account for client money received or held by it.
      (2) Without limiting subrule (1), the firm must have procedures—
      (a) to enable it to identify and trace client money it receives (electronically, by post, through an agent or by any other means) or holds; and
      (b) to promptly record receipt of all client money; and
      (c) to ensure that, except as permitted by these rules, client money is not mixed with other money; and
      (d) to enable it to produce accurate accounting records showing how much client money has been transferred to insurers, clients, eligible intermediaries and other persons.

      Note 1 For a firm's record keeping obligations, see chapter 8.

      Note 2 For provisions allowing client money to be mixed with other money, see rule 3.4.3 (Obligation on receipt of amount that is part client money) and rule 3.5.3 (Exception-non-client money paid into account).
      Derived from QFCRA RM/2011-3 (as from 1st July 2011)