Asset formula

Central Bank issues revised client asset requirements

On June 23, 2022, the Central Bank of Ireland (the “CBI”) issued revised client asset requirements for investment firms.

The revised client asset requirements, referred to as “RCA 2022”, are set out in Part 6 of a draft third edition of the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Investment Firms) Regulations 2013. A related draft guidance note (the “Tips”) has also been issued by the CBI to help investment firms comply with CAR 20221.

RAC 2022 applies to investment firms that hold client assets or enter into title transfer collateral agreements. ‘Investment firms‘ include MiFID investment firms, investment firms and UCITS/AIFM management companies with MiFID ‘additoinal’ permissions (but only for those ‘additoinal’ Activities)2.

CAR 2022 now also includes credit institutions carrying out MiFID activities in the definition of ‘Investment firm’.

RAC 2022 includes new provisions relating to:

  • reconciliation and calculation requirements for client financial instruments;
  • transfer of business requirements – investment firms must disclose business transfer arrangements to clients before receiving assets and notify the CBI three months in advance of any material transfer of client assets under a transfer of activity;
  • CBI reporting requirements and client disclosures for relevant credit institutions;
  • prime brokerage services – as part of prime brokerage agreements, this will need to include a “Client Assets Schedule” summarize the main provisions relating to the use of clients’ financial instruments by an investment firm;
  • Title Transfer Collateral Agreements – Title Transfer Collateral Agreements shall include specific provisions regarding the transfer of client assets and termination agreements; and
  • the client’s asset management plan (“CAMP”) – the PAC must now include a ‘customer asset applicability matrix’ (“IT MADE ME”) which, according to the guidance, should ‘provide an independent reader with a clear and succinct overview of the products and services/activities that are within or outside the scope of the Client Assets Regime, so that it is easy to understand where and how Client Assets occur in each line of business of an investment solidify’. The Guide also contains extensive details on the expected content of the CAP.

Comment and next steps

Firms should begin the process of aligning their systems, processes and client documentation to meet the requirements of RAC 2022 and the Guidelines. In particular, in the scope, credit institutions should take note of these new requirements, including reporting and publication requirements, which will apply under RAC 2022 and guidance.

BCI expects full compliance with CAR 2022 from 1 July 2023 (for investment firms) and 1 January 2024 (for credit institutions). The CBI indicates that existing client asset requirements3 will remain in effect until revoked on July 1, 2023.

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