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Client Money Rules

Q1 : Can a licensed corporation’s own money be put into the designated trust account or client account to cushion situations where there is a delay in the remittance of settlement monies caused by the broker’s errors, paying bank’s remittance errors or other unforeseen situation beyond the control of the licensed corporation?


Allowing a licensed corporation to commingle some buffer money (belonging to the licensed corporation) with client money in a designated trust account will undermine the objective of maintaining a segregated trust account which is to facilitate tracing to the money therein by clients in the event of the licensed corporation’s insolvency. If a licensed corporation becomes aware that it is holding an amount of money in a segregated account that is not client money, it is required to pay that amount of money out of the segregated account within one business day pursuant to section 10 of the Rules.

At any rate, if a licensed corporation wishes to complete the settlement of any transaction conducted on behalf of a client on time in spite of a shortage of cash funds in the client account attributable to settlement errors relating to other transactions, the licensed corporation could consider the alternative arrangement of drawing funds (or allowing funds to be drawn) from its house account as a backup measure so long as such action is not prohibited by other law, regulation or contractual obligation that the intermediary is subject to.

Section reference: 4(1)

Last update: 23 Dec 2003

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