Statement of Guidance - Client Assets, Money and Safekeeping (Securities Investment Business)

Summary

This is a CIMA Statement of Guidance addressing how licensees carrying on securities investment business under the Securities Investment Business Law (SIBL) must handle client money and client assets under the Conduct of Business (COB) Regulations. It explains the principle of segregation — keeping client money and safe-custody securities separate from the licensee's own funds and records — and sets out detailed rules on client bank accounts, use of custodians, treatment of collateral, interest, contingent liability (margin) transactions, holding client money outside the Cayman Islands, and reconciliation of records.

The guidance applies to Cayman Islands securities investment business licensees (brokers/dealers and similar firms regulated under SIBL) and, by extension, to nominee companies they control and custodians they use.

• Definitions clarified: What counts as 'client money', including exceptions such as opted-out professional client/market counterparty money, fees due to the licensee, connected-party money, and same-day settlement money.
• COB Regulations translated into practical guidance: Covers Regulations 28, 29, 35, 40 and 47.
• Worked example: Provided for calculating the 'client money requirement'.
• Appendix A: A sample bank segregation letter.

Overall it is explanatory/interpretive guidance rather than a stand-alone rule, but it operationalizes binding COB Regulation obligations, so licensees are expected to follow it to demonstrate compliance with those regulations, including daily monitoring of client money balances, prompt banking of receipts, disclosure obligations to clients, and periodic reconciliation of client title documents.

Key obligations

• Licensees must hold client money separate from the licensee's own money, except in the limited circumstances permitted by the guidance.
• A licensee must not hold money other than client money in a client bank account except for a minimum sum to keep the account open, money temporarily in the account, or unwithdrawn excess interest.
• Where a licensee's own securities are registered in the same name as clients' safe custody securities, it must register client securities in a separate designated account and, where applicable, hold separate certificates of title.
• A licensee must not lodge safe custody securities with a custodian in a co-mingled account unless the custodian agrees in writing to the specified safeguarding terms (no licensee ownership designation, no withdrawal except to/on licensee instruction, provision of statements on request, no lien beyond safekeeping charges).
• A licensee must ensure any nominee company it controls maintains accounting records in accordance with CIMA's Statement of Guidance on Records.
• Licensees must instruct clients to make payments (cheques, drafts, electronic transfers) payable to the licensee's designated 'Client Bank Account'.
• Automated transfers of client money received into the licensee's own account, or mixed remittances, must be paid into a client bank account in accordance with Regulation 40, with non-client-money portions paid out as soon as practicable.
• Money owed by a licensee to a client must be paid into a client bank account or paid out under Regulation 47 as soon as possible and no later than one business day after it becomes due and payable.
• Dividends received outside the Cayman Islands on a client's behalf must be distributed to the client or paid into a client bank account no later than three business days after notification of receipt.
• Licensees must have procedures ensuring money received by employees or field representatives is paid into a client bank account or forwarded to the licensee no later than the next business day after receipt.
• A licensee must not hold client money in a client bank account outside the Cayman Islands unless this is disclosed to the client in writing, and must not effect a transaction placing money in a jurisdiction the client has objected to in writing.
• Licensees must not use one client's money to fund another client's position in contingent liability transactions; if a client is under-margined, the licensee must top up the account with its own money, which then becomes client money.
• Margined transactions should be reconciled on a daily basis.
• Each business day, a licensee must ensure the aggregate balance of its client bank accounts is at least equal to the calculated 'client money requirement' as of the close of the previous business day.
• A licensee must disclose to private clients whether interest is payable on client money and on what terms.
• Pursuant to Regulation 35, a licensee (or its nominee/affiliated company) must reconcile books and records relating to client title documents at least every six months using the Total Count Method, or the Rolling Stock Method only with CIMA's prior consent and an auditor's report, and must promptly correct discrepancies found.

Applies to

securities investment business licensees, nominee companies controlled by a licensee, custodians (recognised and authorised), approved banks

Deadlines

• every six business day (close of business): Licensee must ensure aggregate client bank account balances meet the client money requirement as at the close of the previous business day.
• no later than one business day after money is due and payable: Licensee must pay money owed to a client into a client bank account or pay it out under Regulation 47.
• no later than three business days after notification of receipt: Dividends received outside the Cayman Islands on behalf of a client must be distributed or paid into a client bank account.
• no later than the next business day after receipt: Money received by employees or field representatives must be paid into a client bank account or forwarded to the licensee.
• at least every six months: Licensee must reconcile books and records of client title documents using the Total Count or Rolling Stock Method under Regulation 35.
• within 24 hours: Money received from a client due to settle a transaction within this period is excluded from the definition of client money.