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In this way, the client account is isolated the firm’s creditors on the firm’s insolvency (such a failure a “[[primary pooling event]]”). | In this way, the client account is isolated the firm’s creditors on the firm’s insolvency (such a failure a “[[primary pooling event]]”). | ||
===[[Cash]]=== | |||
[[Cash]] is special. It is unlike any other financial instrument. Title to [[cash]], by definition, passes by delivery. You can’t deal with your interests in cash. You can hold it, or pass it, and that’s it. | |||
===Banks=== | ===Banks=== | ||
Approved banks do not have to offer client money protection – they have a specific exemption from doing so in the CASS rules – but may do so if they wish. But they may well find it is quite painful and difficult to do. | Approved banks do not have to offer client money protection – they have a specific exemption from doing so in the CASS rules – but may do so if they wish. But they may well find it is quite painful and difficult to do. | ||
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*In some cases (for example a {{tag|CSA}} or even a [[loan]]) the payee might in turn have to pay some money back to you at a later date. But you are exposed to the payee’s credit risk in the mean time: you are a '''creditor'''. | *In some cases (for example a {{tag|CSA}} or even a [[loan]]) the payee might in turn have to pay some money back to you at a later date. But you are exposed to the payee’s credit risk in the mean time: you are a '''creditor'''. | ||
*This general case does '''not''' involve [[client money]] (see {{tag|CASS}} {{Cassprov|7.11.25}}). | *This general case does '''not''' involve [[client money]] (see {{tag|CASS}} {{Cassprov|7.11.25}}). | ||
*You could say this is “title transfer” of cash, but you don't need to, because cash is | *You could say this is “title transfer” of [[cash]], but you don't need to, because all delivery of cash it title transfer. There ''is'' no title to cash. <br> | ||
'''The special case''': ''Because you want your counterparty to look after it for you, in connection with some other service it is providing you.'' | '''The special case''': ''Because you want your counterparty to look after it for you, in connection with some other service it is providing you.'' | ||
*Here, you don't owe the payee anything. The only contract you have arises because it has agreed to look after your money for you. | *Here, you don't owe the payee anything. The only contract you have arises because it has agreed to look after your money for you. | ||
*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]] (fondly known as the {{tag|CASS}} rules). | *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]] (fondly known as the {{tag|CASS}} rules). | ||
*Now this special case creates a [[Metaphysics|metaphysical]] problem, because when you look after something, you’re not meant to take ownership of it. You’'re just a {{tag|custodian}}. But as noted above, you ''can’t'' "just look after" someone else’s cash | *Now this special case creates a [[Metaphysics|metaphysical]] problem, because when you look after something, you’re not meant to take ownership of it. You’'re just a {{tag|custodian}}. But as noted above, you ''can’t'' "just look after" someone else’s cash. | ||
*This necessitates two things: | *This necessitates two things: | ||
**''First'': A person agreeing to look after your money can’t keep it: it must pass it on to someone else to look after, and since — hang on: that creates an infinite regression doesn’t it? — therefore... | **''First'': A person agreeing to look after your money can’t keep it: it must pass it on to someone else to look after, and since — hang on: that creates an infinite regression doesn’t it? — therefore... | ||
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**When you deposit your money with a bank you have its credit risk. But, as we all now know, banks are special: they’re carefully regulated, well capitalised and generally designed to be appropriate places to look after your money. | **When you deposit your money with a bank you have its credit risk. But, as we all now know, banks are special: they’re carefully regulated, well capitalised and generally designed to be appropriate places to look after your money. | ||
====In a {{nutshell}}==== | |||
====In a {{nutshell}} | A normal bank deposit is an unsecured liability of the bank’s to repay an amount of money: it is a form or loan, repayable on-demand. a bank deposit does is not any kind of right over any money deposited by the bank: it can’t be. | ||
Only banks are entitled to hold deposits. Everyone else to whom you give cash, apropos nothing, must deposit it with a bank. The bank will record that the account is in the name of the depositor as trustee for its client. 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). | |||
}} | }} | ||
=== | ===[[Bank]]s=== | ||
Deposit-taking credit institutions benefit from the general “{{cassprov|banking exemption}}” (CASS {{cassprov|7.10.16}}) from the obligation to hold money on behalf of clients subject to the client money rules. | Deposit-taking credit institutions benefit from the general “{{cassprov|banking exemption}}” (CASS {{cassprov|7.10.16}}) from the obligation to hold money on behalf of clients subject to the client money rules. | ||
{{Client money and cash brokerage}} | {{Client money and cash brokerage}} | ||