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Treatment of shortfalls - CASS Provision: Difference between revisions
Treatment of shortfalls - CASS Provision (view source)
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{{a|cass|{{nuts|CASS|6.6.54}}}}''The equivalent provision under CASS 7 (for {{t|client money}} discrepancies) is CASS {{cassprov|7.15.29}}''<br> | {{a|cass|{{nuts|CASS|6.6.54}}}}''The equivalent provision under CASS 7 (for {{t|client money}} discrepancies) is CASS {{cassprov|7.15.29}}''<br> | ||
The famous [[CASS shortfalls]] provision: should you have some settlement fails into your [[custody]] business — quite likely, if you offer [[contractual settlement]] — such that at any time you hold fewer [[custody asset]]s than your records suggest you ought to, you must put aside your own[[cash]] or [[assets]] to cover that [[shortfall]], and mark it to market until the shortfall is resolved, to mitigate your client’s exposure. | |||
Yours truly reads that to mean you cannot simply put aside some of your own assets and grant a security interest over those assets in favour of clients, thereby maintaining legal ownership of them, even though that is plainly the most sensible way to resolve the implied credit risk to yourself presented by a temporary shortfall which you expect quickly to resolve. No, you must actually [[Title transfer|pass title]] to those assets outright to the clients, but somehow confect an unspecified reversionary right to the assets which, in the theory, you no longer own, should the happy day come — expected to be tomorrow — when the shortfall is resolved. | Yours truly reads that to mean you cannot simply put aside some of your own assets and grant a security interest over those assets in favour of clients, thereby maintaining legal ownership of them, even though that is plainly the most sensible way to resolve the implied credit risk to yourself presented by a temporary shortfall which you expect quickly to resolve. No, you must actually [[Title transfer|pass title]] to those assets outright to the clients, but somehow confect an unspecified reversionary right to the assets which, in the theory, you no longer own, should the happy day come — expected to be tomorrow — when the shortfall is resolved. | ||