UK FCA warns firms on inappropriate use of title transfer collateral arrangements

We are sending this letter to you and other FCA-authorised firms acting as brokers in wholesale financial markets, who currently, or may in the future, offer services (including clearing broker and prime broker services) that involve holding clients’ cash or securities as collateral.

In this context, it is common market practice to enter into TTCAs with clients over that collateral, allowing firms to use the cash or securities to secure obligations owed to them by their clients. Outside such arrangements, cash and securities given to the firm when providing investment services to a client are likely to be client money or custody assets under the CASS regime. In all cases firms must ensure compliance with any applicable CASS rules, including obligations in relation to the use of TTCAs and the correct application of the exclusions in CASS for TTCAs.

The full letter is available at https://www.fca.org.uk/publication/correspondence/dear-ceo-letter-inappropriate-use-title-transfer-collateral-arrangements.pdf

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