• IMEB Chapter 4 IMEB Chapter 4 Client money distribution rules

    • IMEB Part 4.1 IMEB Part 4.1 Client money distribution rules — general

      • IMEB 4.1.1 Application — chapter 4

        (1) This chapter applies to a firm if—
        (a) the firm is an insurance intermediary with an authorisation that permits it to conduct only insurance mediation, or only insurance mediation and captive insurance management, and no other business that is or includes a regulated activity; and
        (b) the firm holds client money.
        (2) However, this chapter does not apply in so far as insurance mediation relates to reinsurance contracts.

        Note1 Insurance intermediary is defined in rule 1.2.1 and insurance mediation is defined in rule 1.2.2. Authorisation, regulated activity and reinsurance contract are defined in the glossary. Client money is defined in rule 1.2.9.

        Note 2 Insurance intermediaries to which this chapter applies should refer to INMA for how to deal with client money in case of firm-related distribution events or third party-related distribution events.
        Amended by QFCRA RM/2014-3 (as from 1st January 2015)

      • IMEB 4.1.2 Duty to notify distribution events

        A firm must have procedures to ensure that the Regulatory Authority and the firm's clients are promptly informed of any—

        (a) firm-related distribution event; and
        (b) third party distribution event in relation to—
        (i) an eligible bank with which the firm maintains a client bank account for money received from those clients; and
        (ii) an eligible intermediary to which the firm transfers, under part 3.7, client money of those clients.
        Derived from QFCRA RM/2011-3 (as from 1st July 2011)

    • IMEB Part 4.2 IMEB Part 4.2 Firm-related distribution events

      • IMEB 4.2.1 Firm-related distribution events — order of distribution

        (1) After the occurrence of a firm-related distribution event in relation to a firm (whether the firm is incorporated in the QFC or otherwise), the firm must distribute client money as follows:
        (a) all client money held in any client bank account must be pooled and distributed—
        (i) first to pay for costs attributable to the distribution of the client money in accordance with subparagraphs (ii) and (iii); and
        (ii) secondly for clients (other than clients who are insurers and who are acting as such) for whom the money is held on a proportionate basis in accordance with the amount of their respective valid claims against the firm for money owed to them by the firm that is client money; and
        (iii) thirdly for insurers mentioned in subparagraph (ii) according to their respective interests;

        Note INMA, rule 5.10.4 applies if a firm that is incorporated in the QFC does not have sufficient amounts of client money in the client bank accounts to satisfy the claims under this paragraph.
        (b) after satisfaction of all claims in paragraph (a)—
        (i) if a liquidator, receiver, administrator, or trustee in bankruptcy has been appointed over the firm, the excess must be distributed in accordance with applicable insolvency or bankruptcy laws; and
        (ii) in all other cases, the excess must be distributed in accordance with the direction of the Regulatory Authority.
        (2) However, any distribution of client money under subrule (1) is subject to the deduction of any fees payable to an insolvency practitioner or other similar official that has responsibility for distributing such client money.
        Amended by QFCRA RM/2014-3 (as from 1st January 2015)

      • IMEB 4.2.2 Client money received after firm-related distribution event

        (1) Client money received by a firm after a firm-related distribution event—
        (a) must not be pooled with client money held in any client bank account that was opened before the event; and
        (b) must be—
        (i) returned to the relevant client without delay; or
        (ii) if the money cannot be returned without delay — paid into a client bank account that was opened after the event and held in the account until the money can be returned to the client.
        (2) However, client money received by a firm after a firm-related distribution event need not be returned to the client to the extent that—
        (a) it relates to a transaction that had not been completed at the time of the firm-related distribution event and the firm has decided to use the money to complete the transaction; or
        (b) it is money relating to a client and that money is due from the client to the firm at the time of the firm-related distribution event.
        Derived from QFCRA RM/2011-3 (as from 1st July 2011)

    • IMEB Part 4.3 IMEB Part 4.3 Third party-related distribution event

      • IMEB 4.3.1 IMEB 4.3.1 Continuing fiduciary duties

        A firm is not responsible for any deficit in client money arising as a result of, or in connection with, a third party-related distribution event if the firm—

        (a) used appropriate skill, care and judgement in the selection of the eligible bank or eligible intermediary and its subsequent monitoring of the bank or intermediary; and
        (b) complied with its other fiduciary duties.
        Derived from QFCRA RM/2011-3 (as from 1st July 2011)

        • IMEB 4.3.1 Guidance

          A firm that has complied with its fiduciary duties is not required to make good any deficit. However, the firm may choose to do so in the interests of its relationship with clients (see rule 4.3.2).

          Note Third party-related distribution event, client money and eligible bank are defined in the glossary.

          Derived from QFCRA RM/2011-3 (as from 1st July 2011)

      • IMEB 4.3.2 Firms may make good deficit

        (1) A firm that, under rule 4.3.1, is not responsible for a deficit in client money arising as a result of, or in connection with, a third party-related distribution event may choose to make good the deficit.
        (2) If a firm chooses not to make good a deficit under subrule (1)—
        (a) the deficit must be borne by clients who have valid claims against the firm for money owed to them by the firm that is client money, in proportion to the respective value of their claims; and
        (b) the amount of the deficit must be promptly notified in writing to each affected client, together with the client's share in the deficit.
        (3) A firm must, as soon as is practicable after the deficit is known, make and keep records of each client's share in the deficit.

        Note For a firm's record keeping obligations, see chapter 8.
        Derived from QFCRA RM/2011-3 (as from 1st July 2011)

      • IMEB 4.3.3 Client money received after third party-related distribution event

        (1) Client money received by a firm after a third party-related distribution event must not be paid to the eligible bank, or transferred to the eligible intermediary, that suffered the third party-related distribution event unless the client gives written instructions after the occurrence of the event to pay the money to the eligible bank or to transfer the money to the eligible intermediary to meet the client's obligation to the bank or intermediary.
        (2) If the firm does not receive any instructions mentioned in subrule (1), the firm must pay the client money into a client bank account that was opened with another eligible bank after the third party-related distribution event.

        Note Third party-related distribution event, eligible bank and eligible intermediary are defined in the glossary.
        Derived from QFCRA RM/2011-3 (as from 1st July 2011)