INMA 5.5.16 When client money payable to eligible third party

(1) Except as otherwise provided in these rules, an investment business firm may pay client money into an account with an entity that is not an eligible bank, or permit the payment of client money into such an account, only if the entity is an eligible third party.
(2) An investment business firm may pay client money to a third party account, or permit the payment of client money into such an account, only if the money is to be used:
(a) for a transaction or series of transactions for the customer concerned; or
(b) to meet an obligation of the customer.
(3) An investment business firm may pay client money into a third party account, or permit the payment of client money into such an account, only if:
(a) under the laws applying to the money and the account, the money will be recognised as segregated from, and will not form part of, the firm's assets in its insolvency; and
(b) after making an appropriate assessment, the firm is satisfied, on reasonable grounds, that the third party is a suitable person to hold the money in a third party account.

Note Rule 5.5.15 applies to the making of an assessment for subrule (3) (b).
(4) The firm must have systems and controls to ensure that:
(a) the requirement in subrule (3) (a) continues to be met; and
(b) the assessment made for subrule (3) (b) remains correct.
(5) An investment business firm may pay, or permit the payment of, client money to a third party account, only if:
(a) the title of the account includes the words “client account”; and
(b) the firm:
(i) has notified the relevant eligible third party in writing that:
(A) all money standing to the credit of the account is held by the firm as trustee; and
(B) the third party is not entitled to combine the account with any other account, or to exercise any right of set-off or counterclaim against money in the account in relation to any sum owed to it on any other account of the firm; and
(ii) has requested the third party to give it a written acknowledgement of the matters set out in subparagraph (i).
(6) If an eligible third party does not provide the acknowledgement referred to in subrule (5) (b) (ii) within 1 month after the firm requests it, the firm may continue to hold client money with the third party if the firm:
(a) promptly gives notice in writing to any customer to whom the firm owes client money that the third party has not accepted that it has no right of set-off or counterclaim against client money in relation to sums owed to it by the firm; and
(b) ensures that any notification that it subsequently sends under this rule includes a statement that the third party has not accepted that it has no such right of set-off or counterclaim.
Derived from QFCRA RM/2014-4 (as from 1st January 2015).