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Client money: Difference between revisions
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===Client Money generally=== | ===Client Money generally=== | ||
How is client money different to ordinary cash? | How is client money different to ordinary cash? | ||
So at the moment a client’s [[cash]] hits a [[broker]]’s [[client money]] bank account, ''neither the client nor the broker holds the cash. The bank does''. Therefore: | It isn’t. [[Cash]] is [[cash]] is [[cash]]. “[[Client money]]” describes the relationship between the giver and the receiver of [[cash]], not the cash itself. The cash itself, as it moves around, is just [[cash]]. | ||
You can’t encumber [[cash]], as a matter of basic banking [[ontology]]. [[Cash]] is special. It is unlike any other [[financial instrument]]. You can’t deal with your interests in [[cash]]. You can hold it, or pass it, and that’s it. Whoever physically holds cash, “owns it” against the rest of the world for all purposes. | |||
So at the moment a client’s [[cash]] hits a [[broker]]’s [[client money]] bank account, ''neither the client nor the broker holds the cash. The bank does''. | |||
Therefore: | |||
*As between client and [[broker]] it is [[client money]]. | *As between client and [[broker]] it is [[client money]]. | ||
*As between client and the [[client bank]] it is [[indebtedness]]. | *As between client and the [[client bank]] it is [[indebtedness]]. | ||
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*In the local bank’s hands it is [[working capital]]. | *In the local bank’s hands it is [[working capital]]. | ||
===CASS regime=== | ===[[CASS]] regime=== | ||
The FCA’s client money rules are designed to minimise credit exposure to firms which hold client funds, but who are not authorised to hold client deposits themselves (in otherwords, are not regulated banks). Such firms must deposit client funds with an {{cassprov|approved bank}} which record the deposits in the firm’s name but belonging to the firm’s clients, so it is clear that the firm has no proprietary claim on the account. | The FCA’s [[client money rules]] are designed to minimise credit exposure to firms which hold client funds, but who are not authorised to hold client deposits themselves (in otherwords, are not regulated banks). Such firms must deposit client funds with an {{cassprov|approved bank}} which record the deposits in the firm’s name but belonging to the firm’s clients, so it is clear that the firm has no proprietary claim on the account. | ||
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]]”). | ||