What actions should a person authorized to engage in securities activities take if the cash balance of a customer portfolio in the company’s records does not match the cash balance of a customer portfolio deposited with the bank and the cash balance with the Kuwait Clearing Company?
Securities Lawyers Team of RHR Law Firm answers this question.
First of all, who are the authorized persons?
They are all persons authorized by the Capital Markets Authority to engage in one or more securities activities and who manage or keep customers’ assets and funds, including an investment portfolio manager, a collective investment scheme manager, a custodian, a clearing agency, and a qualified securities broker registered in an exchange Money bills.
What kind of money and assets does the customer have?
Customer money is all cash money received or held by any authorized person for or on behalf of a customer in the course of carrying out any securities activity, minus cash funds allocated to fulfil the customer’s obligations as a result of transactions conducted in his favor, whether due for performance, pending on condition, or added to order.
The customer’s assets are any non-monetary funds derived from securities or other assets that the authorized person receives or possesses for the benefit of the customer in connection with any securities activity.
If the authorized person’s fees are due for payment, they are not included in the customer’s funds in accordance with the contract concluded between them.
What kind of money and assets does the customer have?
Customer money is all cash money received or held by any authorized person for or on behalf of a customer in the course of carrying out any securities activity, minus cash funds allocated to fulfil the customer’s obligations as a result of transactions conducted in his favor, whether due for performance, pending on condition, or added to order.
The customer’s assets are any non-monetary funds derived from securities or other assets that the authorized person receives or possesses for the benefit of the customer in connection with any securities activity.
If the authorized person’s fees are due for payment, they are not included in the customer’s funds.
Regulatory requirements for the protection of customer funds and assets
The executive regulations of Law No. 7 of 2010 require the authorized person to take the necessary steps to protect and preserve the customer’s money and assets, and not to use them for purposes other than those for which they were intended. The authorized person may not use these funds, assets, or rights derived from those assets for his own account or for the account of a customer or another person unless the authorized person has access to automated and control systems capable of managing customers’ funds, assets, and operations in an accurate and effective manner.
The authorized person must also maintain complete separation between the transactions and orders he executes for his own account and the transactions and orders he executes for the accounts of customers, as well as ensure that the customer is the person who benefits from all transactions involving his money, including deposits, withdrawals, and transfers of funds. This is in addition to the transactions being made in and out of the customer’s accounts.
The authorized person must keep records and accounts that ensure the separation of the customer’s assets and money from those belonging to another customer or the authorized person, and that the customer’s assets and money are recorded in a separate account with him in that customer’s name.
When the authorized person engages in any securities activity, the authorized person must regularly reconcile the balances of his accounts and customer records with the bank account balances into which the customer’s money is deposited, as well as the records of any other party who keeps the customer’s assets or money.
In the event of a discrepancy or mismatch between the customer’s records and accounts with the authorized person, the discrepancy must be addressed by the end of the business day on which the balance matching process was performed, and no later than three business days after the mismatch.
If the authorized person’s records and accounts do not match the customer’s accounts with the bank where his money is deposited, or the accounts of any other party holding the customer’s assets and money, the authorized person must correct any discrepancies between the balances as soon as possible. If he is unable to complete the necessary processing and there is a shortage,
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To book an appointment or request legal advice about the duties of securities companies in the optimal implementation of clients’ orders, we are pleased to receive your inquiries at (info@Taqneen.com).