S.L. 370.5 Art. 10Use of clients’ instruments.

(1) A subject person shall not enter into arrangements for securities financing transactions in respect of instruments which it holds on behalf of a customer nor shall the subject person otherwise use such instruments for its own account or for the account of any other person or customer of the subject person, unless both of the following conditions are met:

(a) the customer has given his prior express consent to the use of the instruments on specified terms, as clearly evidenced in writing and affirmatively executed by signature or equivalent; and

(b) the use of that customer’s instruments is restricted to the specific terms to which the customer consents.

(2) The subject person shall not enter into arrangements for securities financing transactions in respect of instruments which are held on behalf of a customer in an omnibus account maintained by a third party, nor shall the subject person otherwise use instruments held in any such account for its own account or for the account of any other person, unless, in addition to the conditions set prescribed in sub-regulation (1), at least one of the following conditions is met:

(a) each customer whose instruments are held together in an omnibus account has given prior express consent in accordance with sub-regulation (1)(a); or

(b) the subject person has in place systems and controls which ensure that only instruments belonging to customers who have given prior express consent in accordance with sub-regulation (1)(a) are so used.

(3) The records of the subject person shall include details of each customer on whose instructions the use of instruments has been affected as well as the number of instruments belonging to each customer who has given his consent, so as to enable the correct allocation of any loss.

(4) The subject person shall take appropriate measures to prevent the unauthorised use of customer instruments for its own account or the account of any other person, such as:

(a) the conclusion of agreements with customers on measures to be taken by the subject person in case the customer does not have enough provision on its account on the settlement date, such as borrowing of the corresponding securities on behalf of the customer or unwinding the position;

(b) the close monitoring by the subject person of its projected ability to deliver on the settlement date and the putting in place of remedial measures if this cannot be done; and

(c) the close monitoring and prompt requesting of undelivered securities outstanding on the settlement day and beyond.

(5) The subject person shall adopt specific arrangements for all customers to ensure that the borrower of customer instruments provides the appropriate collateral.

(6) The subject person shall monitor the continued appropriateness of the collateral referred to in sub-regulation (5) and take the necessary steps to maintain the balance with the value of customer instruments.

(7) The subject person shall not enter into arrangements which are prohibited under Article 16(10) of MiFID.