• INMA Part 5.10 INMA Part 5.10 Client money distribution rules

    • INMA Division 5.10.A INMA Division 5.10.A Client money distribution rules — general

      • INMA 5.10.1 Firm-related distribution event

        Each of the following is a firm-related distribution event for an investment business firm:

        (a) the appointment of a liquidator, receiver or administrator or of a trustee in bankruptcy;
        (b) an event in any jurisdiction equivalent to an appointment mentioned in paragraph (a);
        (c) the withdrawal of the firm’s authorisation;
        (d) the imposition or variation of a condition, restriction or requirement on the firm’s authorisation so that it is no longer permitted to hold client money.
        Derived from QFCRA RM/2014-4 (as from 1st January 2015).

      • INMA 5.10.2 Third-party-related distribution event

        Each of the following is a third-party-related distribution event for an eligible bank or eligible third party:

        (a) the appointment of a liquidator, receiver or administrator or of a trustee in bankruptcy;
        (b) an event in any jurisdiction equivalent to an appointment mentioned in paragraph (a).
        Derived from QFCRA RM/2014-4 (as from 1st January 2015).

      • INMA 5.10.3 Duty to notify distribution events

        An investment business firm must have procedures to ensure that the Regulatory Authority and the firm’s customers are promptly informed of:

        (a) any firm-related distribution event; or
        (b) any third-party-related distribution event in relation to:
        (i) an eligible bank with which the firm maintains a client bank account for money received from those customers; or
        (ii) an eligible third party to which the firm pays client money of those customers.
        Derived from QFCRA RM/2014-4 (as from 1st January 2015).

    • INMA Division 5.10.B INMA Division 5.10.B Distribution after firm-related distribution events

      • INMA 5.10.4 Firm-related distribution events — order of distribution

        (1) After a firm-related distribution event in relation to an investment business firm (whether the firm is incorporated in the QFC or otherwise), the firm must distribute client money as set out in this rule.
        (2) All client money held in a client bank account or third party account must be pooled and distributed:
        (a) first, to pay the costs of distributing it in accordance with paragraph (b); and
        (b) secondly, to customers for whom it is held, proportionately in accordance with the amount of their respective valid claims against the firm for client money.
        (3) Any client money remaining in the firm’s client bank accounts and third party accounts after the satisfaction of all the claims referred to in subrule (2) must be distributed:
        (a) if a liquidator, receiver, administrator, or trustee in bankruptcy has been appointed over the firm — in accordance with the applicable insolvency or bankruptcy laws; or
        (b) in any other case — as the Regulatory Authority directs.
        (4) If the amount of client money held in the firm’s client bank accounts and third party accounts is not enough to satisfy all its customers’ valid claims for client money, all the firm’s other beneficially-owned assets may be used to satisfy those claims in priority to all of the firm’s other creditors (other than creditors that have a prior ranking security interest in such assets).
        Derived from QFCRA RM/2014-4 (as from 1st January 2015).

      • INMA 5.10.5 Client money received after firm-related distribution event

        (1) If an investment business firm receives client money after a firm-related distribution event:
        (a) the money must not be pooled with client money held in a client bank account that was opened before the event; and
        (b) either:
        (i) the money must be returned to the relevant customer without delay; or
        (ii) if the money cannot be returned without delay — the money must be paid into a client bank account opened after the event, and must be held in the account until it can be returned to the customer.
        (2) However, client money received by an investment business firm after a firm-related distribution event need not be returned to the customer to the extent that:
        (a) the money relates to a transaction that had not been completed at the time of the event and the firm has decided to use it to complete the transaction; or
        (b) it is due from the customer to the firm at the time of the event.
        Derived from QFCRA RM/2014-4 (as from 1st January 2015).

    • INMA Division 5.10.C INMA Division 5.10.C Third-party-related distribution events

      • INMA 5.10.6 Firms' continuing fiduciary duties

        An investment business 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 selecting the eligible bank or eligible third party concerned, and in subsequently monitoring the bank or third party; and
        (b) complied with its other fiduciary duties.
        Note Third-party-related distribution event, client money, eligible bank and eligible third party are defined in the glossary.

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

      • INMA 5.10.7 Firms may make good deficit

        (1) If an investment business firm is not responsible for a deficit in client money that arose as a result of, or in connection with, a third-party-related distribution event, rule 5.10.6 does not prevent the firm from choosing to make good the deficit.
        (2) If the firm chooses not to make good the deficit:
        (a) the deficit must be borne by customers who have valid claims against the firm for client money owed to them by the firm, in proportion to the respective value of their claims; and
        (b) the firm must promptly notify each affected customer in writing of the amount of the deficit and the customer's share in it.
        (3) As soon as is practicable after the deficit is known, the firm must make and retain a record of each customer's share in the deficit.
        Derived from QFCRA RM/2014-4 (as from 1st January 2015).

      • INMA 5.10.8 Client money received after third-party-related distribution event

        (1) If an investment business firm receives client money after a third-party-related distribution event, the firm must not pay the money to the eligible bank or eligible third party that suffered the event unless the customer concerned gives written instructions after the event to pay the money to the bank or third party to meet an obligation to the bank or third party.
        (2) If the firm does not receive any such instructions, it must pay the money into a client bank account, opened after the event, with another eligible bank or eligible third party.
        Derived from QFCRA RM/2014-4 (as from 1st January 2015).