SFA: Confirmation of rule changes in relation to stock lending transactions

United Kingdom

SFA Board Notice 459 sets out proposed rule changes in relation to stock lending transactions involving customer's assets.

These proposed rule changes were implemented on 1st June 1998, with the following minor amendments:

  • The rules relating to capacity of firms were modified so that firms who simply act as custodians or as agent for another person may rely on that other person if the firm reasonably believes that the person who instructs it is obliged to deal with the assessment of risk and of the appropriateness or otherwise of the terms and conditions (in the absence of contrary indications). Any instructions received from a customer must be taken into account when deciding what terms and conditions are appropriate, and in the absence of some reason not to do so they should normally be followed.

  • Firms are reminded that the provision of collateral by a customer for its obligations (e.g. by way of security) does not transfer beneficial ownership to the firm, but beneficial ownership remains with the customer. Therefore, customer consent is required for any lending of that collateral.