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| ===[[Client money]]===
| | {{a|cass|}} |
| Generally, there are two reasons you might pay money to someone else under a contract:
| | For a general exposition on the glorious topic of [[client money]], go to the [[client money]] page. It’s a trip. |
| ====The general case====
| | ==={{Anatomy}}=== |
| ''Because you are obliged to pay it to him under the contract.''
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| *In some cases (for example a {{tag|CSA}} or even a [[loan]]) the payee might in turn have an obligation to pay some money back to you. But you are exposed to the payee's credit risk in the mean time: you are his '''creditor'''.
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| *This general case does not involve handling [[client money]].
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| *You could say this is “title transfer” of cash, but you don't need to, because cash is special: title to cash, by definition, passes by delivery.
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| ====The special case===
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| ''Because you want him to look after it for you under the contract.''
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| *Here, you don't owe the payee anything, and the only contract you have with the person arises because he's agreed to look after the money for you.
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| *This special case is a sort of safekeeping: it is a regulated activity. In the UK it is regulated by the {{tag|FCA}} under the [[Client Asset Sourcebook]] (fonldly known as the {{tag|CASS}} rules).
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| *Now this special case creates a metaphysical problem, because when you look after something, you're not meant to take ownership of it. You're just a custodian. But as noted above, you ''can't'' "just look after" someone else's cash: Casg is special. Just by holding it, you own it.
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| *This necessitates two things:
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| **''First'': A person agreeing to look after your money can't keep it: they have to pass it on to someone else to look after 0 and therefore
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| **''Second'': Since - hang on - that creates an infinite regression doesn't it? - there needs to be one class of special people who ''are'' allowed to look after your money by keeping it for themselves but promising to pay it back when you want it.
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| **And so, lo and behold there are: This special class of people are ''banks''.
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| **You are exposed to the credit risk of banks, but as we all now know banks are carefully regulated, well capitalised, immune from contagion and entirely appropriate places to look after your money.
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| ====In a {{nutshell}} then?====
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| ''Anyone'' can borrow some money off you; only someone special can hold your money for you. Everyone else has to look after your money by giving it to a bank to hold for you in your name. In that case there is no debtor/creditor relationship with the payee as long as the payee promptly transfers the cash on to a bank with whom you will have a debtor/creditor relationship. Note this is also title transfer (you can’t {{isdaprov|not}} title transfer cash), but within a prescribed period, the transfer goes to a third party bank. (if the intermediary were to go insolvent in the mean time it's tough luck).
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| ===Banks===
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| Deposit-taking credit institutions benefit from the general “banking exemption” from the obligation to hold money on behalf of clients subject to the client money rules. A bank may hold cliient money as banker and not trustee.
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| ===[[Delivery versus payment]]=== | |
| Note that transactions that are settled [[DVP]] do not usually involve the holding money on a client's behalf at all: (instead the client would be paying the broker either as its contractual counterparty, where the broker acts as principal, or in settlement of the client's obligation to reimburse the broker for moneys it jhas already disbursed on the client's behalf (in acquiring the stock in the first place), where the broker acts as agent).
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| Even without the general banking exemption, the obligation to hold fclient money only arises after a certain period (generally longer than the period for which a broker would expect to be holding money in case)
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| There are specific exemptions from the obligation to hold as client money relating to delivery versus payment transactions.
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| This is an anatomy of the {{tag|CASS}} Rules in the {{tag|FCA}} Sourcebook. | | This is an anatomy of the {{tag|CASS}} Rules in the {{tag|FCA}} Sourcebook. |
| {{CASS Section 1 TOC}} | | {{CASS Section 1 TOC}} |
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| '''Schedule: {{cassprov|Transitional Provisions and Schedules}}''' | | '''Schedule: {{cassprov|Transitional Provisions and Schedules}}''' |
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| {{cassboilerplate}}
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