Requirement (MIFID)
Article 18 Depositing client funds
Requirements MIFID - DIRECTIVE 2006/73/EC
Description
Description
1. Member States shall require investment firms, on receiving
any client funds, promptly to place those funds into one or more
accounts opened with any of the following:
(a) a central bank;
(b) a credit institution authorised in accordance with Directive
2000/12/EC;
(c) a bank authorised in a third country;
(d) a qualifying money market fund.
The first subparagraph shall not apply to a credit institution
authorised under Directive 2006/48/EC of the European
Parliament and of the Council of 14 June 2006 relating to the
taking up and pursuit of the business of credit institutions
(recast) (1) 0 in relation to deposits within the meaning of that
Directive held by that institution.
2. For the purposes of point (d) of paragraph 1, and of
Article 16(1)(e), a ‘qualifying money market fund’ means a
collective investment undertaking authorised under Directive 85/
611/EEC, or which is subject to supervision and, if applicable,
authorised by an authority under the national law of a Member
State, and which satisfies the following conditions:
(a) its primary investment objective must be to maintain the
net asset value of the undertaking either constant at par (net
of earnings), or at the value of the investors’ initial capital
plus earnings;
(b) it must, with a view to achieving that primary investment
objective, invest exclusively in high quality money market
instruments with a maturity or residual maturity of no
more than 397 days, or regular yield adjustments consistent
with such a maturity, and with a weighted average maturity
of 60 days. It may also achieve this objective by investing
on an ancillary basis in deposits with credit institutions;
(c) it must provide liquidity through same day or next day
settlement.
For the purposes of point (b), a money market instrument shall
be considered to be of high quality if it has been awarded the
highest available credit rating by each competent rating agency
which has rated that instrument. An instrument that is not rated
by any competent rating agency shall not be considered to be of
high quality.
For the purposes of the second subparagraph, a rating agency
shall be considered to be competent if it issues credit ratings in
respect of money market funds regularly and on a professional
basis and is an eligible ECAI within the meaning of Article 81(1)
of Directive 2006/48/EC.
3. Member States shall require that, where investment firms do
not deposit client funds with a central bank, they exercise all due
skill, care and diligence in the selection, appointment and
periodic review of the credit institution, bank or money market
fund where the funds are placed and the arrangements for the
holding of those funds.
Member States shall ensure, in particular, that investment firms
take into account the expertise and market reputation of such
institutions or money market funds with a view to ensuring the
protection of clients’ rights, as well as any legal or regulatory
requirements or market practices related to the holding of client
funds that could adversely affect clients’ rights.
Member States shall ensure that clients have the right to oppose
the placement of their funds in a qualifying money market fund.
Comment
Applies to Article 13(8) of Directive 2004/39/EC