IMEB 3.9.1 Duty to perform calculation

(1) A firm must perform a client money calculation at least once a month to ensure that, as at the close of business on the day before the calculation is made (the cut-off date), the total of the firm's client money resource (CM resource) is equal to or greater than its client money requirement (CM requirement).
(2) The client money calculation must be performed by following the steps below:

Step 1

Calculate the firm's CM resource by adding the following amounts as at the cut-off date:
(a) the amount of money in the firm's client bank accounts; plus
(b) the amount of money transferred to eligible intermediaries; plus
(c) any amount (such as premiums, premium refunds and claims money) immediately payable to the firm by insurers, clients and other persons.
Step 2

Calculate the firm's CM requirement by adding the following amounts as at the cut-off date:
(a) the amount of money transferred to eligible intermediaries; plus
(b) unearned commissions payable to the firm; plus
(c) any money held by approved representatives or non-QFC intermediaries of the firm; plus
(d) any amount immediately payable to insurers, clients and other persons by the firm.
Note Under rule 3.6.1 (3), an amount paid by cheque or other payable order must remain in the client bank account until the cheque or payable order is presented to the client's bank and cleared by the paying agent.

Step 3

Compare the firm's CM resource and its CM requirement to check if they are equal.
(3) If a firm's CM resource is less than its CM requirement, the firm has a shortfall and must pay money into the firm's client bank account in accordance with rule 3.9.2 (a).
(4) If a firm's CM resource is greater than its CM requirement, the firm has a surplus and must pay out of the firm's client bank account the surplus in accordance with rule 3.9.2 (b).

Note To accurately calculate its CM resource and CM requirement, firms are required under rule 3.3.3 (2) (d) to have procedures to enable it to produce accurate accounting records.
(5) Within a reasonable period after performing a client money calculation, a firm must also—
(a) match its CM resource to its CM requirement by reference to individual clients; and
(b) achieve a match for a majority of its clients and transactions.

Example of client money calculation
Step 1 Calculate CM resource      
(a) Bank balances      
Client bank account 20,000    
Total amount in client bank accounts   20,000  
(b) Money transferred to eligible intermediaries (EIs)      
Intermediary 10,000    
Total amount transferred to EIs   10,000  
(c) Insurance debtors      
Due from clients 5,000    
Due from insurers 3,000    
Total amount due from insurance debtors   8,000  
CM resource     38,000
Step 2 Calculate CM requirement      
(a) Total amount transferred to EIs (same amount as 1 (b))   10,000  
(b) Unearned commissions   1,000  
(c) Money held by approved representatives or non-QFC intermediaries   3,700  
(d) Insurance creditors      
Due to insurers 4,000    
Due to clients 2,500    
Due to other persons 2,000    
Total amount due to insurance creditors   8,500  
CM requirement     23,200


Step 3 Compare CM resource and CM requirement

In this example, the CM resource (38,000) is greater than its CM requirement (23,200), resulting in:

Surplus 14,800


The firm must therefore pay out of the client bank accounts the amount of the surplus. The surplus must be paid out of the client bank account by the close of business on the day the surplus is identified (see rules 3.9.1 (4) and 3.9.2 (b)).

Amended by QFCRA RM/2014-6 (as from 1st January 2015)