Prime brokerage agreement disclosure annex

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The famous prime brokerage disclosure annex mandated by CASS 9.3. Note especially the second part, which refers explicitly to the CF10a’s personal responsibility for making sure everything is tickety-boo. Which will mean your local CF10a might be inclined, almost imperceptibly, to obsess madly about your catalogue of prime brokerage disclosure annexes at every waking moment (yours or hers).

Strictly speaking, one only needs a PBDA if one is reusing or (as our American friends like to say, “rehypothecating” client assets. If you don’t reuse custody assets — that is, you have no right to transfer them to your own account for your own nefarious purposes, you don’t need to provide your client with a PBDA.

The rule, which was not significantly modified by MiFID II, you can see in original here: CASS Chapter 9

Contrarian view

The PBDA is one of the great work-creation schemes of the modern age. For some reason the FCA requires prime brokers to tell clients — by way of a formalistic document having no legal effect — exactly the terms on which the PB may reuse their assets, despite the fact that the customer will likely have its own legal department and an external advisor to thrash these things out for it, and whom really are far better placed to provide this information should it suddenly forget.

See also

• Prime brokerage