This paper is a combined Consultation and Discussion Paper. It consults on changes to the client assets regime necessary to adhere to a European regulation, proposes to introduce a radical change in the client money rules applicable to investment firms, and opens a discussion on the wider regime.
The paper is split into three parts:
a) Part I outlines the segregation and porting measures in Articles 39 and 48 of the EU Regulation on OTC derivatives, central counterparties and trade repositories, commonly referred to as the European Market Infrastructure Regulation (EMIR) and consequential changes to the client assets sourcebook (CASS).
b) Part II sets out the FSA's proposals for introducing multiple pooling. These proposals are partly born out of the changes outlined in Part I and could result in the most significant changes the regulator has made to the client assets regime in over 20 years.
c) Part III is a discussion on the wider client assets review currently underway, which is focused on getting a better result in the context of client assets in a firm’s insolvency.
Pursuant to EMIR, when a clearing member firm becomes insolvent, the client transactions (also referred to as ‘positions’) it holds in client accounts at a central counterparty (CCP) and the margin supporting those transactions, may be transferred to another client account held by a back-up clearing member. This process is called ‘porting’ (‘port’ and ‘ported’ should be read accordingly). The margin may be client money.
The comments on Part I are to be sent by 16 October 2012. The comments on Parts II and III are to be sent by 30 November 2012.
Press release
Full Consultation paper
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