In Board Notice 490 SFA has issued guidance to firms who are forced
to deal, through agents, with undisclosed principals. This guidance
is necessary given SFA's responsibility to ensure that the European
directives on credit management and large exposures are complied
To ensure that firms are able to comply with good
practice in relation to credit risk management, they should
encourage agents to provide full disclosure whenever possible. To
the extent that this cannot occur, SFA encourages firms to request
the confidential disclosure of the principal's identity to the
firm's credit and regulatory capital departments.
In addition, firms are encouraged to adopt a
conservative approach to their large exposures responsibilities by,
for example, taking a 100% capital charge against individual,
undisclosed exposures, or by treating all undisclosed exposures as
an exposure to a single counterparty.