2.2.6.1. General description

Arranging Custody is listed in section 6 of Schedule 1 of GEN and means arranging provision of custody for one or more Persons.

For the difference between Providing Custody and Arranging Custody refer to item 2.2.5.1.

The type of activities that constitute Arranging Custody include:

(a)     negotiating and settling terms of the contract between the custody provider and the person who is obtaining that service (the Client);

(b)     assisting the Client to complete application forms and other processes;

(c)     collecting and processing the Client’s payments; and

(d)     transmitting information (including instructions from the Client and confirmations by the custody provider) between the Customer and the custody  provider.

The Client Asset provisions only apply to firms holding or controlling Client Assets and to firms Providing Custody.

As a firm Arranging Custody does not “safeguard and administer Investments”, the Client Asset provisions in COB section 8 have only limited application to such a firm (see COB Rule 8.1.5.).

A firm “Arranging Custody”, although not subject to substantive Client Asset provisions (because it does not hold or control Client Assets), is still required to undertake due diligence on a non-AIFC custodian with whom it arranges for its Client to obtain custody services.

An Authorised Firm authorised to carry on the regulated activity of Arranging Custody is subject to prudential supervision and must comply with AIFC Prudential Rules for Investment Firms.

Currency regulation

Currency transactions will be performed via AIFC Banks if processed in only foreign currency, and via second-tier banks in any currency. For more details of transactional implications see Chapter 4 of PERG.

The table below illustrates currency regulation implications if services are offered to residents of Kazakhstan that are not AIFC Participants.

For more details see Chapter 4 of PERG.

2.2.6.2. Exclusions

A Person (an “introducer”) does not carry on the activity of Arranging Custody merely by introducing another Person to a custodian who is an Authorised Firm or a Regulated Financial Institution authorised to provide custody.

This exclusion does not apply if:

(a)     the custodian is a member of the same Group as the introducer;

(b)     the custodian is a part of the same legal entity as the introducer and, conducts custody services outside the AIFC; or

(c)     the introducer is remunerated for making the introduction by any Person, including by an entity referred to in (a) or (b).

An exchange does not Arrange Custody merely by making arrangements for, or taking steps that facilitate:

(a)     the safeguarding and administration of assets belonging to Members or other participants; or

(b)     the settlement by another Person of transactions entered into on a facility operated by the exchange.