Regulatory Update – Changes in FSRA COB Module

The Financial Services Regulatory Authority (FSRA) has implemented changes in its Conduct of Business Module (COB). The new rules were published on 15 August 2023. Prominent changes were made in the following areas:

Client classification Client classification and Certain conduct requirements relating to Investment Business

(a) Client classification

(b) Client assets and,

(c) Certain conduct requirements relating to Investment Business

Client Classification

Client categories have now been updated and now there are only two categories as follows:

(a) Retail Clients

(b) Professional Clients

The category of Market Counterparty is now merged into the category of Professional Clients.

Further, the sub-categories of Professional Clients are limited to two only i.e. (a) Deemed professional clients and (b) assessed professional clients. The category of service based professional clients is now merged into Assessed Professional Client.

Deemed Professional Client: Category of deemed professional client now includes Regulated Financial Institution

Assessed Professional Client: The net asset criteria is updated from USD 500,000 to USD 1,000,000.

Client Assets and Safe Custody

The firms are not required to make available to each of their clients to whom they provide prime brokerage services a statement in a durable medium:

(a) showing the value at the close of each day;

(b) detailing any other matters which the firm considers are necessary to ensure that a client has up-to-date and accurate information about the amount of Client Money and the value of Safe Custody Assets held by that firm for it

The statement must be made available to those clients not later than the close of the next day to which it relates.

When assessing the suitability of a Third-Party Agent to hold a Client Account for Safe Custody, firm must also now regard to the following:

(a) If the Third-Party Agent is a Related Party, whether applicable insolvency laws would results in the subordination of the firm’s claims in the event of the failure of the Third-Party Agent;

The quantity of Client Investments to be placed with the Third-Party Agent, the availability of alternative Third-Party Agents and concentration risk.

Before an Authorised Person holds Collateral on behalf of a Client it must disclose to that Client additional information in relation to such arrangement.

Holding Collateral

Before an Authorised Person holds Collateral on behalf of a Client it must disclose to that Client additional information in relation to such arrangement.

Title Transfer Collateral Agreements

The Client Money Rules and Safe Custody Rules do not apply in respect of a Safe Custody Asset or Client Money which is held by a firm pursuant to a Title Transfer Collateral Agreement.

Disclaimer: The purpose of this publication is to create awareness and has been written in general terms. This publication is not for any specific situation and therefore no opinion should be drawn from it for any particular circumstances. Limitless Consulting recommend that the reader of this publication should refer to the official documents referred in the document, seek appropriate professional advice for any particular situation and accepts no liability for any loss as a result of any information mentioned in this publication.