• INMA Part 5.9 INMA Part 5.9 Reconciliation of client money

    • INMA Division 5.9.A INMA Division 5.9.A Calculation and reconciliations

      • INMA 5.9.1 Duty to perform client money calculation

        (1) An investment business firm must carry out a calculation (client money calculation) at least once a month to ensure that, as at the close of business on the day before the calculation is carried out (the cut-off date), the firm's client money resource (CM resource) is at least equal to its client money requirement (CM requirement).
        (2) The client money calculation is carried out as follows:
        Step 1

        Calculate the firm's CM resource by adding the following amounts (as at the cut-off date):

        •    the amount in the firm's client bank accounts;
        •    the amount transferred to eligible third parties;
        •    any amount immediately payable to the firm by customers and other persons.
        Step 2

        To calculate the firm's CM requirement, add the following amounts of client money (as at the cut-off date):

        •   unearned fees or unearned commissions payable to the firm;
        •   the amount transferred to eligible third parties;
        •   any money held by approved representatives or non-QFC intermediaries of the firm;
        •   any amounts immediately payable to customers and other persons by the firm.

        Note Under rule 5.7.1(3), an amount paid by cheque must remain in the client bank account until the cheque is presented to the customer's bank and cleared by the paying agent.
        Step 3

        Compare the CM resource and the CM requirement to see whether they are equal.

        (3) If the firm's CM resource is less than its CM requirement, the firm has a shortfall and must pay money into the client bank account to which the shortfall relates in accordance with rule 5.9.2(a).
        (4) If the firm's CM resource is greater than its CM requirement, the firm has a surplus and must pay the surplus out of the client bank account to which the surplus relates in accordance with rule 5.9.2(b).
        (5) Within a reasonable period after carrying out the client money calculation, the firm must also:
        (a) match its CM resource to its CM requirement for each customer; and
        (b) achieve a match for a majority of its customers and transactions.
        Derived from QFCRA RM/2014-4 (as from 1st January 2015).

      • INMA 5.9.2 INMA 5.9.2 What to do if CM resource is less than or more than CM requirement

        If an investment business firm's client money calculation shows that its CM resource is less than, or more than, its CM requirement, the firm must ensure that:

        (a) if the CM resource is less than the CM requirement — the amount of that shortfall is paid into the client bank account to which it relates by the close of business on the day on which the shortfall is discovered; or

        Note For an investment business firm's obligation to notify the Regulatory Authority if it might not be able to pay-in the shortfall on time — see rule 5.9.8.
        (b) if the CM resource is more than the CM requirement — the amount of that surplus is paid out of the client bank account to which it relates by the close of business on the day on which the surplus is discovered, unless the firm considers that it is prudent to keep the money in the account to protect other money in the account.

        Example of when it might be prudent to keep surplus

        An investment business firm might want to keep money in the account if there are unreconciled items in its business ledgers as at the date of the calculation, and the firm wants to ensure that the client money in the account is protected.
        Derived from QFCRA RM/2014-4 (as from 1st January 2015).

        • INMA 5.9.2 Guidance

          1 An investment business firm should not pay money from the client bank account for the firm's own account before the client money calculation has been carried out. See rule 5.7.1(2)(g) and the guidance to that rule.
          2 Rule 5.5.8(3) allows money (other than client money) to be kept in a client bank account if the amount is the minimum amount necessary to open the account or keep it open. Rule 5.5.8(2) allows a firm to pay its own money into a client bank account if the firm considers it prudent to do so to protect client money in the account.
          Derived from QFCRA RM/2014-4 (as from 1st January 2015).

      • INMA 5.9.3 INMA 5.9.3 Duty to reconcile accounts

        Within 10 business days after the day on which an investment business firm carries out a client money calculation, the firm must reconcile the balance, as recorded by the firm, on each of its client bank accounts with the balance on that account in the statement or confirmation given by the bank with which the account is maintained.

        Derived from QFCRA RM/2014-4 (as from 1st January 2015).

        • INMA 5.9.3 Guidance

          When reconciling bank statements, firms should be aware that cheques that have been drawn but not presented and cleared might create an apparent surplus in the client bank account, and that if the amount of such a cheque is paid out of the account after the calculation, a shortfall might result.

          Derived from QFCRA RM/2014-4 (as from 1st January 2015).

      • INMA 5.9.4 Duty to review calculation and reconciliation

        (1) An investment business firm must ensure that a calculation or reconciliation under this Division is reviewed by an employee of the firm who has sufficient seniority.
        (2) The employee must state in writing whether the calculation or reconciliation was carried out in accordance with this Division.
        Derived from QFCRA RM/2014-4 (as from 1st January 2015).

      • INMA 5.9.5 Duty to rectify discrepancies

        (1) An investment business firm must investigate and rectify any discrepancy discovered by a calculation, reconciliation or review under this Division unless the discrepancy is solely because of timing differences between the accounting systems of the firm and the bank concerned.
        (2) If appropriate, the firm must rectify such a discrepancy by paying money into or out of the relevant client bank account. The firm must do so as soon as possible, but within 1 business day after the discrepancy is discovered.
        Derived from QFCRA RM/2014-4 (as from 1st January 2015).

    • INMA Division 5.9.B INMA Division 5.9.B Terms of holding client money

      • INMA 5.9.6 Duty to notify significant discrepancies

        An investment business firm must notify the Regulatory Authority immediately if the firm discovers a significant discrepancy by a calculation, reconciliation or review under Division 5.9.A (Calculation and reconciliations) and the discrepancy is not rectified within 1 business day after the day on which it is discovered.

        Derived from QFCRA RM/2014-4 (as from 1st January 2015).

      • INMA 5.9.7 Duty to notify failure to carry out calculation or reconciliation

        An investment business firm must notify the Regulatory Authority immediately if it cannot or does not carry out a calculation, reconciliation or review required by Division 5.9.A.

        Derived from QFCRA RM/2014-4 (as from 1st January 2015).

      • INMA 5.9.8 Duty to notify inability to pay-in shortfall

        An investment business firm must notify the Regulatory Authority immediately if it becomes aware that it may not be able to pay-in a shortfall by the close of business on the day the shortfall is discovered.

        Note For the obligation to pay-in a shortfall — see rule 5.9.2(a).

        Derived from QFCRA RM/2014-4 (as from 1st January 2015).