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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. | 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' | 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: | 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: | ||