INMA 6.1.18 Notifying customers if investments to be held outside QFC
(1) Before an INMA firm provides custody services to a customer, it must notify the customer in writing:
(a) of the arrangements for recording and registering custody investments, claiming and receiving dividends and other entitlements and interest, and giving and receiving instructions relating to the investments concerned;
(b) of the firm's obligations to the customer in relation to exercising the customer's rights in relation to the investments;
(c) of the basis on which, and any terms governing the way in which, the investments will be held, including any rights that the firm may have to realise those investments if the customer defaults;
(d) how, and how often, the firm will report to the customer in relation to the investments;
(e) if the firm intends to mix the customer's investments with those of other customers:
(i) a statement of that fact; and
(ii) if the customer is a retail customer:
(A) that customers' individual entitlements may not be identifiable by separate certificates or other physical documents, or an equivalent electronic record; and
(B) that if a liquidator, receiver or administrator, or a trustee in bankruptcy, is appointed to the firm, and a deficiency is found in customers' custody investments, each customer may have to bear a share of the deficiency in proportion to that customer's original share of the investments in the account;
(f) if the customer's investments may be held outside the QFC, a statement of that fact and a statement that the market practices, and the insolvency and legal regime, in that jurisdiction may differ from the practices and regime in the QFC;
(g) if the firm holds or intends to hold custody investments in an account with an eligible custodian in the same corporate group as the firm, a statement of that fact;
(h) the extent of the firm's liability in the event of default by a nominee controlled by the firm or an eligible custodian;
(i) if legal title to the investments will be registered or recorded in the name of the firm, a statement of that fact; and
(j) if the customer has instructed the firm about holding, registering or recording a custody investment under rule 6.1.10(4)(f) (Systems and controls in relation to custody investments) — that the consequences of doing so are at the customer's own risk, unless the firm has agreed otherwise.
(2) In the case of a customer that is a retail customer, the firm must not register or record legal title to the customer's investments in the firm's name unless the firm has obtained the customer's written consent and has notified the customer that:
(a) the investments will be or may be registered or recorded in the firm's name;
(b) as a result, the investments may not be segregated from the firm's investments; and
(c) in the event of the appointment of a liquidator, receiver or administrator, or trustee in bankruptcy, to the firm, the customer's assets may not be as well protected from claims made on behalf of the general creditors of the firm.
(3) A notification for subrule (1) or (2) may be in the firm's terms of business.
|Derived from QFCRA RM/2014-4 (as from 1st January 2015).|