FSA has published Consultation Paper 10/9 on enhancing the Client Assets Sourcebook. The consultation focuses on the following proposals:
- all prime brokerage agreements must contain a disclosure annex highlighting the contractual limit on re-hypothecation;
- prime brokers must report daily on client money and assets holdings to their clients;
- restricting the placement of client money deposits held in client bank accounts within a group to 20%;
- prohibiting the use of general liens in custodial agreements;
- creating a new controlled function with specific responsibility for client money and assets; and
- introducing a client money and assets return (CMAR), which will be reviewed and authorised on a monthly basis for medium to large firms and twice a year for small firms.
The consultation period closes on 30 June 2010. FSA intends to finalise rules in a policy statement in the third quarter of 2010.