CL-2.5 CL-2.5 Third Party Custodians
CL-2.5.1
An
investment firm licensee must require that if a safe custodyfinancial instrument is recorded in an account with a custodian, the custodian makes it clear in the title of the account that the safe custodyfinancial instrument belongs to one or moreclients of theinvestment firm licensee .CL-2.5.2
Before an
investment firm licensee recommends a third party custodian to aretail client it must undertake an appropriate risk assessment of that custodian.CL-2.5.3
An
investment firm licensee that holds safe custodyfinancial instruments with a custodian or recommends custodians toretail clients , is expected to establish and maintain a system for assessing the appropriateness of its selection of the custodian and to assess the continued appointment of that custodian periodically as often as is reasonable in the relevant market. Theinvestment firm licensee is also expected to make and retain a record of the grounds on which it satisfies itself as to the appropriateness of its selection or, following a periodic assessment, continued appropriateness of the custodian.CL-2.5.4
In undertaking an appropriate risk assessment of the custodian in accordance with CL-2.5.2,
investment firm licensees may take into account any or all of the following:(a) The expertise and market reputation of the custodian, and once a safe custodyfinancial instrument has been lodged by the firm with the custodian, the custodian's performance of its services to theinvestment firm licensee ;(b) The arrangements for holding and safeguardingfinancial instruments ;(c) An appropriate legal opinion as to the protection of custody assets in the event of insolvency of the custodian;(d) Current industry standard reports;(e) Whether the custodian is regulated and by whom;(f) The capital or financial resources of the custodian;(g) The credit rating of the custodian; and(h) Any other activities undertaken by the custodian and, if relevant, any affiliated company.Amended: January 2007
