Requirement (MIFID)
Article 16 Safeguarding of client financial instruments and funds
Requirements MIFID - DIRECTIVE 2006/73/EC
Description
Description
1. Member States shall require that, for the purposes of
safeguarding clients’ rights in relation to financial instruments
and funds belonging to them, investment firms comply with the
following requirements:
(a) they must keep such records and accounts as are necessary
to enable them at any time and without delay to distinguish
assets held for one client from assets held for any other
client, and from their own assets;
(b) they must maintain their records and accounts in a way that
ensures their accuracy, and in particular their correspondence
to the financial instruments and funds held for
clients;
(c) they must conduct, on a regular basis, reconciliations
between their internal accounts and records and those of
any third parties by whom those assets are held;
(d) they must take the necessary steps to ensure that any client
financial instruments deposited with a third party, in
accordance with Article 17, are identifiable separately from
the financial instruments belonging to the investment firm
and from financial instruments belonging to that third
party, by means of differently titled accounts on the books
of the third party or other equivalent measures that achieve
the same level of protection;
(e) they must take the necessary steps to ensure that client
funds deposited, in accordance with Article 18, in a central
bank, a credit institution or a bank authorised in a third
country or a qualifying money market fund are held in an
account or accounts identified separately from any accounts
used to hold funds belonging to the investment firm;
(f) they must introduce adequate organisational arrangements
to minimise the risk of the loss or diminution of client
assets, or of rights in connection with those assets, as a
result of misuse of the assets, fraud, poor administration,
inadequate record-keeping or negligence.
2. If, for reasons of the applicable law, including in particular
the law relating to property or insolvency, the arrangements
made by investment firms in compliance with paragraph 1 to
safeguard clients’ rights are not sufficient to satisfy the
requirements of Article 13(7) and (8) of Directive 2004/39/EC,
Member States shall prescribe the measures that investment
firms must take in order to comply with those obligations.
3. If the applicable law of the jurisdiction in which the client
funds or financial instruments are held prevents investment
firms from complying with points (d) or (e) of paragraph 1,
Member States shall prescribe requirements which have an
equivalent effect in terms of safeguarding clients’ rights.
Comment
Applies to Article 13(7) and (8) of Directive 2004/39/EC