MiFID II Handbook | Page 15

CUSTODY & COLLATERAL

CUSTODY & COLLATERAL

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✔✔Title Transfer Collateral Arrangements ( TTCAs ) are not to be made with retail clients .
✔✔Firms need to assess the appropriateness of the use of TTCAs and document the assessment process . They then need to show why its use is appropriate .
✔✔Clients need to be explicitly advised of the risks of TTCA on assets .
✔✔Clients need to give explicit consent to enter into a TTCA and indicate that they understand the potential consequences .
✔✔Fund firms have responsibility to ensure borrowers of client assets supply sufficient collateral and that they monitor the appropriateness of the collateral continuously .
✔✔Fund firms have an obligation to regularly review third party accounts being used on behalf of clients .
✔✔Client funds should be placed with more than one firm to safeguard clients ’ rights and minimise risk of loss .
✔✔National regulators can request formal explanations as to why client funds are inadequately diversified .
✔✔A limit has been set on the percentage of client funds that can be deposited with an intra-group credit institution . National authorities are encouraged to probe reasons for any lack of diversification .
✔✔Risk disclosures need to be drawn up for clients to make them aware of any potential issues relating to where assets are held .
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