Stock Exchange Act, 1995

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Client money and investment instruments.

52.—(1) The Bank may, from time to time, impose requirements or may approve of rules in the rules of an approved stock exchange, or both, with respect to clients' money and clients' investment instruments, and such requirements or rules (in this Act referred to as “client money requirements”) may include conditions under which member firms may hold money or investment instruments, or both, for clients.

(2) Without prejudice to the generality of subsection (1) of this section, client money requirements may include requirements or rules in relation to—

(a) the category or categories of member firm to which such requirements or rules apply;

(b) the type or types of accounts to be opened and kept by a member firm arising from its business as a member firm;

(c) the rights, duties and responsibilities of a member firm in relation to money and investment instruments received, held, controlled or paid by it arising from its business as a member firm, including the lodgement to and withdrawal from a client account of client money and client investment instruments;

(d) the acknowledgements or statements to be issued by a member firm in respect of client money and client investment instruments received, held, controlled or paid by it arising from its business as a member firm;

(e) the circumstances in which money other than client money ay be paid into accounts containing client money and the circumstances in which, and the persons to whom, money held in such accounts may be paid out;

(f) the safekeeping of client investment instruments and documents of title relating to such investment instruments;

(g) the use of nominee companies by member firms;

(h) client entitlements, including the treatment or retention of interest, income or profit arising from any client money or investment instrument or documents of title in such cases as may be specified;

(i) the extent to which such client money requirements apply to associated and related undertakings.

(3) Without prejudice to the generality of subsection (1) of this section and notwithstanding the provisions of subsection (2) of this section, an authorised member firm shall—

(a) designate all accounts containing money entrusted to it or received by it for or on account of a client a “ Section 52 account” in all financial records maintained by it,

(b) hold client money in an account or accounts with an institution or type of institution as may be specified by the Bank from time to time,

(c) keep at an office or offices within the State such books and records (including books of accounts) in respect of client money and client investment instruments as may be specified from time to time by the Bank and notify the Bank of the address of every office at which any such books or records are kept,

(d) ensure that any books or records required under this section are examined, at such intervals as may be specified by the Bank, by an auditor who shall report to the Bank and state whether in his opinion the provisions of the client money requirements imposed or rules approved under subsection (1) of this section and the provisions of this subsection have been complied with and on such other matters as may be specified in the client money requirements imposed under subsection (1) of this section,

and an authorised member firm which does not comply with the provisions of paragraph (a) or (c) of this subsection or which does not ensure that books and records kept in respect of client money and client investment instruments are examined by an auditor at such intervals as shall be specified by the Bank or which knowingly holds client money in an account or accounts with an institution other than an institution or type of institution as may be specified by the Bank from time to time, shall be guilty of an offence.

(4) (a) The Bank may specify different books and records for the purposes of this section and in relation to different member firms or different classes of member firms.

(b) Books and records to be kept pursuant to this section shall be—

(i) in addition to any books or other records to be kept by or under any other section of this Act or any other enactment, and

(ii) retained for at least such period as the Bank may specify.

(5) No liquidator, receiver, administrator, examiner or creditor of a member firm shall have or obtain any recourse or right against a client's money or a client's investment instruments or a client's documents of title relating to such investment instruments received, held, controlled or paid on behalf of the client until all proper claims of the client or of the client's heirs, successors or assigns against the client's money or the client's investment instruments or documents of title have been satisfied in full.

(6) A person with which an account is kept in pursuance of client money requirements or rules under this section shall not incur any liability as constructive trustee where money is wrongfully paid from the account unless the person permits the payment with knowledge that the payment is wrongful or having deliberately failed to make inquiries in circumstances in which a reasonable and honest person would have done so.

(7) It shall be an offence for a director, officer or employee of a member firm or any of them to misappropriate fraudulently any money or investment instruments held, controlled or paid on behalf of a client by that member firm.