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Financial advisory
RES5Financial Advisory Services✓Under SFR(LCB) reg 45, when a CMS licence holder borrows specified products from a retail customer, the licence holder must: (a) Provide collateral of at least 100% of the market value of the products borrowed. (b) Mark the collateral to market daily. (c) Document the arrangement in writing, including treatment of dividends and voting rights. (d) Explain the risks to the customer and obtain the customer's understanding in writing before entering the arrangement.
Regulation 45 requires collateral of 100% of market value maintained throughout the arrangement, daily mark-to-market valuation with procedures for shortfalls, a written agreement covering capacities, title transfer, corporate actions, return, termination and governing law, and a prior risk explanation with the customer's written acknowledgement.
The 100% collateral rule applies both when the licence holder borrows from and lends to non-accredited customers.
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