Nominee company: Difference between revisions

Jump to navigation Jump to search
No edit summary
No edit summary
Line 1: Line 1:
{{fullanat2|cass|nominee company||6.2.4|}}
{{fullanat2|cass|nominee company||6.2.4|}}{{d|Nominee company|/ˌnɒmɪˈniː/ /ˈkʌmpəni/|n|}}
A [[nominee company]] is not a custodian per se. It is a dedicated entity which does nothing other than acting as a registered owned of shares. Under CASS a custodian cannot hold its own house positions in the same legal entity as their client’s assets.


A wholly-owned subsidiary of a [[custodian]] used as a nominee company to hold legal title to client investments (other than cash). This common structure in the UK custody Market was in fact  endorsed by Peter Bloxham's ''[https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/271040/PU1560_SAR.pdf Final review of the Investment Bank Special Administration Regulations 2011]'' in January 2014, the third recommendation of which was:
A wholly-owned subsidiary of a [[custodian]] used as a nominee company to hold legal title to client investments (other than cash).
 
Under [[CASS Rules|CASS 6]], a [[custodian]] must not hold its own house positions ''in the same legal entity'' as its clients’ assets. A nominee, therefore, dedicated entity that a custodian sets up to hold its clients’, and ''only'' its clients’ assets. The nominee is not the custodian per se, but a legal entity in its custody chain that acts as a total firebreak between the custodian’s credit risk and its clients’ assets: a dedicated entity which does nothing other than acting as a registered owned of shares for third parties.
 
Thus, should the Custodian go, as they say in Mallorca, “[[tetas arriba]]”, then its insolvency administrator has no licence, no justification, no ''excuse';' for poking around in its client assets looking for baubles and trinkets it can share with the custodian’s unsecured creditors. It’s a clean, segregated ledger, ring-fenced with the deep magic of [[corporate personality]].
 
This common structure in the UK custody market was endorsed by Peter Bloxham's ''[https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/271040/PU1560_SAR.pdf Final review of the Investment Bank Special Administration Regulations 2011]'' in January 2014, the third recommendation of which was:
{{quote|
{{quote|
===Use of Nominee Companies===
===Use of Nominee Companies===
Line 9: Line 14:
The report noted:
The report noted:


:... the rapid transfer of client positions to a solvent successor firm was facilitated by the fact that the failed firm held substantially all its (UK) {{cassprov|custody asset}}s in the name of a separate {{cassprov|nominee company}} {{tag|subsidiary}}. It was possible to transfer the shares in that {{cassprov|nominee company}} as part of the transfer of client positions. The transfer of the shares in the {{cassprov|nominee company}} was sufficient to produce the result that all the client holdings registered in that nominee passed into the control of the transferee, without the need for transfers of individual holdings. I recommend that consideration be given by the FCA to encouraging this practice.”
{{quote|“... the rapid transfer of client positions to a solvent successor firm was facilitated by the fact that the failed firm held substantially all its (UK) {{cassprov|custody asset}}s in the name of a separate {{cassprov|nominee company}} {{tag|subsidiary}}. It was possible to transfer the shares in that {{cassprov|nominee company}} as part of the transfer of client positions. The transfer of the shares in the {{cassprov|nominee company}} was sufficient to produce the result that all the client holdings registered in that nominee passed into the control of the transferee, without the need for transfers of individual holdings. I recommend that consideration be given by the FCA to encouraging this practice.”}}


Yes, the {{tag|CASS}} rules really say “with respect of”. And they don't say the same level responsibility ''as what''. So nice bit of drafting there, ladies and gentlemen of the {{t|European Union}}.
{{sa}}
*[[Custody]]
*[[CASS rules