INVESTMENT SERVICES ACT (CONTROL OF ASSETS) REGULATIONS

SUBSIDIARY LEGISLATION 370.05

INVESTMENT SERVICES ACT

(CONTROL OF ASSETS) REGULATIONS

1st November, 1998

LEGAL NOTICE 240 of 1998, as amended by Legal Notices 496 of 2004,

364, 400 of 2005, 425 of 2013, 113, 215 of 2016 and 398 of 2017.

Part 1

Preliminary

(1) The title of these regulations is the Investment Services

Act (Control of Assets) Regulations.

(2) These regulations shall not apply to custodians of collective

investment schemes, which shall be regulated by the Investment

Services Act (Custodians of Collective Investment Schemes)

Regulations.

(3) The objective of these regulations is to implement the

relevant provisions of Articles 1(3) and (4) and Articles 2 to 8 of

the Commission Delegated Directive (EU) 2017/593 of 7 April

201 6 supp lementing Directive 20 14/6 5/E U of the Euro pean

Parliament and of the Council with regard to safeguarding of

financial instruments and funds belonging to clients, product

governance, obligations and the rules applicable to the provision or

reception of fees, commissions or any monetary or non-monetary

benefits.

(1) Any reference in these regulations to the Act is a

reference to the Investment Services Act, and subject to the

provisions of subregulation (2), the provisions of article 2 of the

said Act shall also apply to these regulations.

(2)

In these regulations, unless the context otherwise requires -

"the Act" means the Investment Services Act;

"assets" means movables and immovable property of any kind;

"Commission Delegated Directive" means Commission Delegated

Directive (EU) 2017/593 of 7 April 2016 supplementing Directive

2014/65/EU of the European Parliament and of the Council with

regard to safeguarding of financial instruments and funds belonging to

clients, product governance obligations and the rules applicable to the

provision or reception of fees, commissions or any monetary or non-

monetary benefits, as amended from time to time;

"the competent authority" means the Malta Financial Services

Authority established by the Malta Financial Services Authority Act;

"control of assets" means the holding or control of assets

belonging to, or on behalf of a customer, by a person hereinafter

referred to as the subject person, acting in the course of rendering

an investment service under the Act, and includes custody of

assets;

"custodian" means a custodian qualified in accordance with

regulation 14;

"customer" means any person whose assets are held under the

control of a subject person;

"Directive 2009/65/EC" means Directive 2009/65/EC of the

European Parliament and of the Council of 13 July 2009 on the

coordination of laws, regulations and administrative provisions

relating to undertakings for collective investment in transferable

securities (UCITS), as amended from time to time and includes any

implementing measures that have been or may be issued

thereunder;

"Directive 2013/36/EU" means Directive 2013/36/EU of the

European Parliament and of the Council of 26 June 2013 on access

to the activity of credit institutions and the prudential supervision

of credit institutions and investment firms, as amended from time

to time and includes any implementing measures that have been or

may be issued thereunder;

"Investment Services Rules" refers to Rules issued by the competent

authority under various articles of the Act;

"MiFID" means Directive 2014/65/EU of the European

Parliament and of the Council of 15 May 2014 on markets in

financial instruments and amending Directive 2002/92/EC and

Directive 2011/61/EU, as amended from time to time, and includes

any implementing measures that have been or may be issued

thereunder;

"professional client" means a client meeting the criteria laid

down in Annex II of MiFID;

"qualifying money market fund" means a collective investment

undertaking authorised under Directive 2009/65/EC, or which is

sub ject to sup erv isio n an d, if applicable, au th orised by the

competent authority under the Act, and which satisfies all of the

following conditions

(a)

its primary investment objective must be to maintain the

net asset value of the undertaking either constant at par

(net of earnings), or at the value of the investors’ initial

capital plus earnings;

(b)

it must, with a view to achieving that primary investment

objective, invest exclusively in high quality money

market instruments with a maturity or residual maturity of

no more than 397 days, or regular yield adjustments

consistent with such a maturity, and with a weighted

average maturity of 60 days. It may also achieve this

objective by investing on an ancillary basis in deposits

with credit institutions

Provided that for the purposes of paragraph (b), a money

market instrument shall be considered to be of high

quality if the collective investment scheme or the

management company on behalf of the collective

investment scheme performs its own documented

assessment of the credit quality of money market

instruments that allows it to consider a money market

instrument as high quality. Where one or more credit

rating agencies registered and supervised by ESMA have

provided a rating of the instrument, the internal

assessment carried out by the collective investment

scheme or the management company on behalf of the

collective investment scheme shall have regard to, inter

alia, those credit ratings;

(c)

it must provide liquidity through same day or next day

settlement;

"Regulation (EU) 2015/2365" means Regulation (EU) 2015/2365

of the European Parliament and of the Council of 25 November

2015 on transparency of securities financing transactions and of

reuse and amending Regulation (EU) No 648/2012 as amended

from time to time;

"retail client" means a client who is not a professional client as

defined in Annex II of MiFID;

"securities financing transaction" means transactions as defined in

Article 3(11) of Regulation (EU) 2015/2365;

"subject person" means a person who is in possession of an

i n v e s t m e n t s er v i c e s l i c en ce u n d e r t h e A ct o r i s o t h e r w i s e

authorised or approved by the competent authority or is acting

under an exemption from the requirement of such a licence in terms

of the Investment Services Act (Exemption) Regulations

Provided that a custodian as defined under the Investment

Services Act (Custodians of Collective Investment Schemes)

Regulations that is also licensed to carry out other investment services

shall also be a subject person under these regulations in relation to

such investment services other than custody for collective investment

schemes and in which case, the Investment Services Act (Custodians

of Collective Investment Schemes) Regulations shall apply.

Part 2

General

(1) A subject person having the control of assets belonging

to a customer in the course of rendering an investment service to

such customer, shall hold such assets solely for and on behalf of

and in the interest of the customer.

(2) Notwithstanding anything stated in article 1894 of the Civil

Code or in the agreement entered into between the subject person

and the customer or the fact that a customer’s assets held under the

control of a subject person are registered in the name and title of or

are otherwise vested in the subject person, such assets shall be

deemed to constitute a distinct patrimony, separate from that

belonging to the subject person and from that of other customers

the assets of whom are also held under the control of the subject

person.

(3) Except as expressly provided in the agreement entered into

between the subject person and the customer and notwithstanding

the provisions of the Civil Code, the control of assets belonging to

a customer by a subject person shall not give or be deemed or

construed to give to the subject person any rights over such assets

nor shall it create any form of loan between the subject person and

the customer and this notwithstanding the nature of the assets or the

rights or obligations of the subject person in relation to the assets.

(1) A customer whose assets are held under the control of a

s u b j e ct p e r s o n e n j o y s a r i g h t o f o w n e r s h i p i n s u c h a s s e t s

notwithstanding that they may be registered in the name and title of

or are otherwise vested in the subject person. Where such assets are

held by the subject person as part of a common pool of identical

assets or are otherwise held in a clients’ or common account, the

customer shall have an undivided share in ownership of all the

assets held collectively by the subject person in such a pool or

account.

(2) The records, accounts and other statements held or issued

by the subject person in terms of regulation 7(3) shall, saving any

proof to the contrary, constitute evidence of their contents and of

the right of ownership of the customer as provided in subregulation

(1).

(1) The creditors of a subject person shall have no claim or

right of action on or against the assets held under the control of the

subject person for and on behalf of and in the interest of any

customer and such assets shall not be affected in any manner by the

p r o v i si o n s o f l a ws an d r eg u la t io n s i n f o r ce r eg u la ti n g t h e

insolvency or bankruptcy of the subject person.

(2) In the event of any such insolvency or bankruptcy or related

order or resolution, or in the event that the competent authority so

requires, the subject person or any administrator or receiver or

other officer appointed to represent it by any court or otherwise,

shall on demand of any customer or of the competent authority,

immediately transfer the control, possession and title to all assets

held by or in the name of the subject person on behalf of the

customer to another subject person or to such other person as may

be instructed by the customer or by the competent authority.

(3) In the event that any assets held under the control of the

subject person are, at the request of any creditor of the subject

person, made subject to any precautionary or executive act or

warrant granted by any Court in terms of the Code of Organization

and Civil Procedure, the customer on whose behalf such assets are

being held or the competent authority may, by application to the

Court, request the release of the assets from such act or warrant and

the Court shall, on production of evidence as it may deem fit,

accede to the application without undue delay.

(4) Security interests, liens or rights of set-off over instruments

or money belonging to a customer and enabling a third party to

dispose of the customer’s instruments or money in order to recover

debts that do not relate to the customer or provision of services to

the customer are not permitted except where this is required by the

applicable law in a third country jurisdiction in which the money or

instruments belonging to the customer are held.

(5) Where a subject person is obliged to enter into agreements

that create such security interests, liens or rights of set-off, it shall

disclose that information to customers indicating to them the risks

associated with those arrangements.

(6) Where security interests, liens or rights of set-off are

granted by the subject person over instruments or money belonging

to the customer, or where the subject person has been informed that

they are granted, these shall be recorded in customer’s contracts

and the subject person’s own accounts to make the ownership status

of customer’s assets clear, such as in the event of an insolvency.

(1) The delivery of the assets of a customer to a subject

person and from a subject person to a customer or another subject

person for the purpose of the control of assets in terms of these

regulations shall not be deemed to constitute a chargeable transfer

for the purposes of the Duty on Documents and Transfers Act and

for the purposes of article 5(1) of the Income Tax Act, where the

d eliv ery o f su ch assets d oes no t co n stitu te a ch an ge in t he

beneficial owner of the assets.

(2) For the purpose of this regulation, beneficial owner means a

person who is the real owner of, or who is otherwise beneficially

entitled to, the assets held under control by the subject person, as is

provided in regulation 4 of these regulations.

Part 3

Control of Assets

(1) A subject person having the control of assets belonging

to a customer shall safeguard such assets and the interest of the

customer therein.

(2) The subject person shall carry out such functions and duties

as shall be required in accordance with these regulations, the terms

and conditions of the agreement entered into with the customer, the

conditions of any investment services licence, and such other

requirements as may be laid down by the competent authority.

(3) The subject person shall maintain proper and adequate

records and accounts of all customers’ assets held under control.

The records and accounts shall identify the customers to whom

such assets belong and shall clearly indicate that the assets of every

customer are separate and distinct from the assets belonging to the

subject person and from other customers' assets held by the subject

person. The records and accounts shall, upon due notice being

given to the subject person, indicate where any pledge or other

right over assets held under the control of the subject person has

been given by the customers to any third parties, and where any

order by any Court has been made in connection with such assets.

(4) The subject person shall maintain accurate records and

accounts in a way that ensures accuracy, and in particular their

c o r r e s p o n d e n c e to th e in s tr u m e n ts an d m o n e y he ld f o r th e

customers and that they may be used as an audit trail.

(5) The subject person shall conduct, on a regular basis,

reconciliations between its records and accounts and those of any

third parties with whom customer’s instruments and money have

been deposited in accordance with regulations 8 and 9.

(6) The subject person entrusted with the control of assets

belonging to customers shall, to every extent reasonably possible,

segregate in a proper manner the assets of every customer from the

assets belonging to the subject person and from the assets of other

customers

Provided that the subject person may, with the written

consent of the customer and in accordance with the terms and

conditions of the agreement entered into with the customer, the

conditions of any investment services licence and such other

requirements as may be laid down by the competent authority and

without prejudice to the customer's right of ownership over the

assets held under control, place and keep such assets in a common

pool of identical assets or otherwise deposit them in a clients’ or

common account.

(7) The subject person shall make appropriate arrangements for

the protection of customers' assets held under control and shall

ensure that such assets are placed under adequate systems to

safeguard such assets from damage, misappropriation or other loss

and which permit the delivery of such assets only in accordance

with the terms and conditions of the agreement entered into with

the customer.

(8) Where it is not reasonably possible for the subject person to

carry out any of the duties specified in this regulation due to the

nature of the assets and of the arrangements whereby control is

exercised, the said duties may be varied with the written consent of

the customer and in accordance with the terms and conditions of

the agreement entered into with the customer, the conditions of any

investment services licence and such other requirements as may be

laid down by the competent authority.

(9) The subject person shall take the necessary steps to ensure

that any customer instruments deposited with a third party in

accordance with regulation 8 are identifiable separately from the

financial instruments belonging to the subject person and from the

instruments belonging to that third party, by means of differently

titled accounts on the books of the third party or other equivalent

measures that achieve the same level of protection.

(10) The subject person shall take the necessary steps to ensure

that the money belonging to the customer deposited in accordance

with regulation 9 with a central bank, a credit institution or a bank

authorised in a third country or a qualifying money market fund,

are held in an account or accounts separately identifiable from any

accounts used to hold money belonging to the subject person.

(11) The subject person shall implement adequate organisational

arrangements to minimise the risk of the loss or diminution of

assets belonging to the customer, or of rights in connection with

those assets, as a result of misuse of the assets, fraud, poor

administration, inadequate record-keeping or negligence.

(12) If, for reasons of applicable law, including the law relating

to property or insolvency, a subject person cannot comply with the

provisions of this regulation to safeguard customers’ rights to

satisfy the requirements of Articles 16(8) and (9) of MiFID, the

subject person shall implement arrangem ents to ensur e that

customers’ assets are safeguarded to meet the objectives outlined in

this regulation.

(13) The competent authority shall issue Investment Services

Rules providing requirements which have an equivalent effect in

terms of safeguarding customers’ rights if the applicable law of the

jurisdiction in which the money or instruments belonging to the

customer are held prevents the subject persons from complying

with the provisions of sub-regulation (9) or (10) of this regulation

Provided that when relying on such equivalent requirements

as prescribed in sub-regulations (9) or (10), the subject persons

shall inform customers that in such instances they do not benefit

from the provisions envisaged under MiFID and the Commission

Delegated Directive.

(1) A subject person may deposit instruments held by it on

behalf of its customers into an account or accounts opened with a

third party.

(2) The subject person shall exercise all due skill, care and

diligence in the selection, appointment and periodic review of the

third party and of the arrangements for the holding and safekeeping

of those instruments.

(3) The subject person shall, in particular, take into account the

expertise and market reputation of the third party as well as any

legal requirements or market practices related to the holding of

instruments that could adversely affect the rights of its clients.

(4) Where the subject person proposes to deposit customer

instruments with a third party, the subject person shall only deposit

instruments with a third party in a jurisdiction where the

safekeeping of instruments for the account of another person is

subject to specific regulation and supervision and that third party is

subject to this specific regulation and supervision.

(5) The subject person shall not deposit financial instruments

held on behalf of customers with a third party in any jurisdiction

that does not regulate the holding and safekeeping of instruments

for the account of another person unless one of the following

conditions is met

(a)

the nature of the instruments or of the investment services

connected with those instruments requires them to be

deposited with a third party in that third country; or

(b)

the instruments are held on behalf of a professional client

and that professional client requests the subject person, in

writing, to deposit them with a third party in that third

country.

(6) The provisions of sub-regulations (4) and (5) shall also

apply when the third party has delegated any of its functions

concerning the holding and safekeeping of instruments to another

third party.

(1) A subject person shall, on receiving any customer

money, promptly place such money with any of the following

(a)

a central bank;

(b)

a credit institution authorised in accordance with the

provisions of Directive 2013/36/EU;

(c)

a bank authorised in a third country; or

(d)

a qualifying money market fund

Provided that this sub-regulation shall not apply to a

credit institution authorised under Directive 2013/36/EU

in relation to deposits within the meaning of the

aforementioned Directive and held by that institution.

(2) Where the subject person does not deposit customer money

with a central bank, it shall exercise all due skill, care and diligence

in the selection, appointment and periodic review of the credit

institution, bank or money market fund where the money are placed

and the arrangements for the holding of such money. The subject

person shall furthermore, consider the need for diversification as

part of its due diligence.

(3) Where the subject person deposits customer money in

accordance with sub-regulation (2), it shall, in particular, take into

account the expertise and market reputation such institutions or

money market funds with a view to ensuring the protection of the

rights of its customers as well as any legal or regulatory

r e q u i r e m e n t s o r m a r k e t p r a c t ic e s r e l a t e d t o t h e h o l d in g o f

customers’ money that could adversely affect such rights.

(4) The subject person shall ensure that customers give their

explicit consent to the placement of their money in a qualifying

money market fund. Furthermore, for the purposes of ensuring that

this right to consent is effective, the subject person shall inform

customers that money placed with a qualifying money market fund

will not be held in accordance with the requirements for

safeguarding customer money prescribed in the Commission

Delegated Directive and these regulations.

(5) Where the subject person deposits customer money with a

credit institution, bank or money market fund of the same group as

the subject person, it shall limit the money deposited with any such

group, entity or combination of any such group entities so that

money does not exceed 20% of all such monies.

(6) The requirement prescribed in sub-regulation (5) can be

waived by the Authority where the subject person is able to

demonstrate that, in view of the nature, scale and complexity of its

business, and also the safety offered by the third parties considered

in sub-regulation (5) and including in any case the small balance of

c u s to m e r m o ne y th e s ub je c t p e r s on h o ld s , th e r e q u ir e m e n t

prescribed in sub-regulation (5) is not proportionate.

(7) The subject person shall periodically review the assessment

made in accordance with sub-regulation (6) and shall notify the

initial and reviewed assessments to the competent authority.

(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 thir d party, nor sh all the subject per son 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.

(1) The subject person shall properly consider the use of

t it le t r an s f e r c o ll at er al ar r an g e m en t s i n t h e co n tex t o f t h e

relationship between the customer ’s obligation to the subject

person and the cu stom er ’s as sets su bjected to title transfer

collateral arrangements by the subject person. The subject person

shall furthermore be able to demonstrate that it has carried out such

considerations.

(2) When considering, and documenting, the appropriateness of

the use of title transfer collateral arrangements, the subject person

shall take into account all of the following factors

(a)

whether there is only a very weak connection between the

customer’s obligation to the subject person and the use of

title transfer collateral arrangements, including whether

the likelihood of a customer’s liability to the subject

person is low or negligible;

(b)

whether the amount of customer money or instruments

subject to title transfer collateral arrangements far exceeds

the customer’s obligation, or is even unlimited if the

customer has any obligation at all to the subject person;

and

(c)

whether all customers’ instruments or money are made

subject to title transfer collateral arrangements, without

consideration of what obligation each customer has to the

subject person.

(3) Where using title transfer collateral arrangements, the

subject person shall highlight to professional clients and eligible

counterparties the risks involved and the effect of any title transfer

collateral arrangement on the customer’s instruments and money.

(1) The subject person shall appoint a single officer of

sufficient skill and authority with specific responsibility for matters

relating to the compliance by the subject person with its obligations

regarding the safeguarding of customer instruments and money.

(2) The subject persons shall decide, whilst ensuring full

compliance with Commission Delegated Directive, whether the

appointed officer is to be dedicated solely to this task or whether

the officer can discharge responsibilities effectively whilst having

additional responsibilities.

The subject person shall ensure that its external auditors

report at least annually to the competent authority on the adequacy

of the subject person’s arrangements under Article 16(8), (9) and

(10) of MiFID and Chapter II of the Commission Delegated

Directive as transposed in these regulations.

(1) The subject person shall make information pertaining

to customers’ instruments and money readily available to the

following entities

(a)

the competent authority;

(b)

appointed insolvency practitioners; and

(c)

the resolution authority.

(2) The information to be made available in terms of sub-

regulation (1) shall include the following

(a)

related internal accounts and records that readily identify

the balances of money and instruments held for each

customer;

(b)

where customer money are held by the subject person in

accordance with regulation 9, as well as details of the

accounts where customer money are held and the relevant

agreements with those entities;

(c)

where instruments held by the subject person in

accordance with regulation 8, as well as details of

accounts opened with third parties and the relevant

agreements with those entities;

(d)

details of third parties carrying out any related outsourced

tasks and details of any outsourced tasks;

(e)

key individuals of the subject person involved in related

processes, including those responsible for oversight of the

subject person’s requirements in relation to the

safeguarding of customer assets; and

(f)

agreements relevant to establish customer ownership over

assets.

(1) A subject person having the control of assets belonging

to customers shall be liable for any loss or prejudice suffered by the

customers due to the subject person’s fraud, wilful default or

negligence including the unjustifiable failure to perform in whole

or in part the subject person’s obligations arising under these

regulations, the terms and conditions of the agreement entered into

with the customers, the conditions of any investment services

licence or such other requirements as may be laid down by the

competent authority.

(2) For the purposes of this regulation, subject person includes

such other subject person to whom functions, duties or assets may

be delegated or entrusted in terms of regulation 16.

(1) A subject person may delegate part of the functions and

duties under regulation 7 to another subject person which is

qualified and competent to take the control of customers’ assets;

and may entrust or deposit all or part of a customer’s assets held

under control with such other subject person.

(2) The liability of the subject person for its own acts or

omissions under regulation 8 shall not be affected or reduced as a

result of the subject person delegating functions and duties, or

entrusting all or part of the assets belonging to a customer, to

another subject person.

(3) Where the subject person delegates or entrusts functions,

duties or assets in terms of subregulation (1) to a person which is a

group company, without prejudice to the liability of such person,

the subject person shall be liable for any loss or prejudice suffered

by the customers as a result of the acts, omissions or insolvency of

such person.

(4) Where the subject person delegates or entrusts functions,

duties or assets in terms of subregulation (1) to a person which is

not a group company, without prejudice to the liability of such

person, the subject person shall be liable for any loss or prejudice

suffered by the customers as a result of the acts or omissions of

such person unless the subject person can prove that such person

was and remains qualified and competent to carry out the functions

a n d d u ties d e leg a t ed a n d th a t th e s ub je c t p e r s on e xe r c i sed

reasonable care to oversee that the functions and duties delegated

were undertaken by such person competently.

(5) The liability of the subject person under subregulations (3)

and (4) may be varied or reduced with the written consent of the

customer and in accordance with the terms and conditions of the

agreement entered into with the customer, the conditions of any

investment services licence and such other requirements as may be

laid down by the competent authority

Provided that the subject person discloses fully to the

customer any risks that may be associated with the nature of the

arrangements whereby control is to be exercised and that the

agreement with the customer shall clearly define the extent of

liability of the subject person.

(6) Where the subject person delegates or entrusts functions,

duties or assets in accordance with specific written instructions

from the customer, the subject person shall not be liable for any

loss or prejudice suffered by that customer as a result of the acts or

omissions of the person to whom functions, duties or assets are

delegated or entrusted as requested by the customer.

(7) For the purposes of this regulation, "group company" in

relation to a subject person means any body corporate which is the

subject person’s subsidiary or parent company or a subsidiary of

the subject person’s parent company, and the terms "parent" and

"subsidiary" shall be construed in accordance with article 2(2) of

the Companies Act.

(1) Where reasonably required by the nature of the assets

and of the arrangements whereby control is to be exercised, a

subject person may, with the written consent of the customer and in

accordance with the terms and conditions of the agreement entered

into with the customer, the conditions of any investment services

licence and such other requirements as may be laid down by the

competent authority, make use of any market clearing system,

settlement system, dematerialised book entry system, centralised

custodial depository or similar system for the purpose of the

control of assets in terms of these regulations.

(2) Such systems as are provided for in subregulation (1) may

also be used to effect all transactions including conveyance,

assignment, transfer, transmission and pledging of assets held

under the control of the subject person and the law of the country in

which the system is maintained shall apply to the validity of such

transactions notwithstanding the provisions of any other law.

(3) The agreement with the customer shall clearly define the

extent of liability of the subject person for any losses that may be

incurred by the customer as a result of the use of such systems.

The subject person shall have the right to charge fees to the

customer and to be reimbursed for expenses in accordance with the

terms and conditions of the agreement entered into with the

customer. The subject person may, if authorised to do so by the

terms and conditions of the said agreement, exercise a right of

retention over the customer ’s assets held under control, to the

extent of any lawfully due but unpaid fees and expenses, until such

fees and expenses are paid.

(1) Without prejudice to any requirements as may be laid

down by the competent authority, an agreement for the control of

assets belonging to a customer may be terminated by the customer,

by the subject person, or by order of the competent authority.

(2) Upon the termination of an agreement for the control of

assets, the subject person shall convey for no consideration the

assets held for the customer, as instructed by the customer or by the

competent authority, without prejudice to the subject person’s right

to payment of any lawfully due fees or expenses in terms of the

agreement entered into with the customer and to any obligations

arising in favour of the customer thereunder.

Part 4

Administrative Penalties, other administrative measures and

Appeals

(1)Where a person falling within the scope of these

regulations fails to comply with any provisions of such regulations

or any rules issued thereunder further implementing such

regulations, the competent authority may, by notice in writing and

without recourse to a court hearing, impose on such person an

administrative penalty and other administrative measures in

accordance with the provisions of the Investment Services Act and

B a n k in g Act ( M i FI D an d M iF I R A d m in is tr a ti ve P e n a lt ie s,

Measures and Investigatory Powers) Regulations, 2017.

(2) A right of appeal to the Financial Services Tribunal shall lie

from the decisions which the competent authority shall take under

these regulations and the provisions of article 19 of the Act shall

apply mutatis mutandis.