Back Custom print Link Text Only Rich Text Print

  • CL-5.2 CL-5.2 Third Party Related Distribution

    • CL-5.2.1

      Upon the insolvency of a third party to which client money has been transferred or is held, the investment firm licensee continues to be accountable to the client in a fiduciary capacity. However, consistent with a fiduciary's responsibility (whether as an agent or trustee) for third parties under law, an investment firm licensee will not be held responsible for a shortfall in client money unless the general laws in the Kingdom of Bahrain or in the relevant jurisdiction requires otherwise, for instance, due to non-compliance with the terms of business in any respect.

    • CL-5.2.2

      To comply with its duties, the investment firm licensee must show proper care:

      (a) In the selection of a third party;
      (b) When monitoring the performance of the third party; and
      (c) When notifying clients in its terms of business the distribution rules applicable in the event of a third party distribution event.
      Amended: January 2007

    • CL-5.2.3

      Following the occurrence of a third party-related distribution event in relation to a designated bank or eligible third party:

      (a) The investment firm licensee must, as soon as is practicable, make and retain a record of each such client's share of the shortfall and must promptly notify the amount of the shortfall to the affected clients (except where the investment firm licensee chooses to make good the shortfall);
      (b) Unless the investment firm licensee chooses to make good any shortfalls in the client money balances held (or which should have been held) in the client bank accounts, or third party accounts held by an investment firm licensee with the relevant designated bank or eligible third party, such shortfalls shall be borne by clients, in proportion to the respective value of their client money balances; and
      (c) Client money received after the third party-related distribution event:
      (i) Must not be transferred to the designated bank or eligible third party which has suffered the third party-related distribution event unless this is on the specific instructions of the client (given after the occurrence of the third party-related distribution event) in order to settle an obligation of that client to that designated bank or eligible third party; and
      (ii) Must, subject to (i), be placed in a separate client bank account that has been opened with a different designated bank after the third party related distribution event has occurred.
      Amended: January 2007