Filing of Customer Funds Segregation Form effective from early February: CMA

The Executive President of the Capital Market Authority, Shaikh Abdullah Salim al Salmi, has approved the customers’ funds segregation form — a move designed to monitor the segregation of customers’ funds at the end of the first trading day of the week.

The approved form, which is to be filed with the CMA the following day, will help enhance regulation pursuant to Article 157 of the Executive Regulation of the Capital Market Law which provides that funds belonging to customers shall be deposited and kept in a separate bank account of the company to settle the obligations resulting from the sale and purchase of securities. Customers’ funds shall not be used to cover deficits in the funds of other customers.

Commenting on the importance of the measure, Khalfan Mohammed al Sharji, Director General of Capital Market Institutions, CMA, said the form was prepared in line with regulatory best practice to apply the rules for segregation of customers’ funds from the funds of the companies operating in the field of securities. It strengthens protection of investors’ funds recorded in the books of the companies and ensures they are not used for purposes other than to boost investor confidence in the companies and the market in general.

Al Sharji pointed out that the CMA has been closely monitoring segregation of customers’ funds according to the audit plan of the licensed companies in accordance with the provisions of Article 157 of the Executive Regulation of the Capital Market Law. The weekly monitoring measure builds on this effort, he said. He added the companies would required to make a weekly be disclosure of their net obligations toward the customers by calculating the following: sum credit balances in the customers’ accounts in addition to the total cheques issued to customers and not encashed, any advance payment received by the customers but not credited in the customers’ accounts with the company up to the end of the calculation day of the segregation report minus the cheques encashed by the customers and transfers to customers’ bank accounts during the last three trading days, and the total amount of cheques received from the customers but not credited in company’s account designated for customers funds up to the end of the segregation calculation report day.