JSE - Client Assets

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Questions and Answers

Under what conditions, according to JSE Clear rules, can JSE Clear manage and invest margins and other monies of clearing members, trading members, or clients?

In a manner and subject to such terms and conditions as its controlling body may decide. (correct)
Only when explicitly authorized by the client in writing for each transaction.
If the clearing or trading member is undergoing financial distress.
At its discretion, without any specific terms and conditions.

According to JSE Clear rules, what is the primary responsibility of a trading member regarding the funds of its clients or other trading members?

To co-mingle funds to maximize investment opportunities.
To invest these funds at its discretion to generate additional revenue for the trading member.
To separate these funds from its own assets at all times, with the exception of trading member's funds held by a trading member that is a bank. (correct)
To ensure funds are used to finance the trading member's own operations for efficiency.

A trading member wants to use funds belonging to one client to cover a temporary shortfall in another client's account. According to the provided text, is this permissible and why?

Yes, as long as the trading member ensures that it benefits both clients involved.
Yes, as long as the trading member makes sure the funds are returned within the same business day
Yes, as long as the trading member ensures that both clients are informed and agree to the arrangement.
No, because co-mingling of funds of any client or another trading member with its own, is not permitted. (correct)

According to the information, what is the primary guideline a trading member must follow regarding additional margin required from a client with whom they have a client agreement?

It should be an amount as agreed upon between the parties in terms of the client agreement. (B) Signup and view all the answers

A trading member discovers it has failed to collect the correct amount of additional margin from a client as required by their agreement. What immediate action should the trading member take, according to the text?

Ensure that the correct amount of additional margin as required by the client agreement with the client is held in respect of each client. (B) Signup and view all the answers

A trading member's records show inconsistencies in the amount of additional margin held for a client compared to what the client agreement stipulates. What action is required?

The records shall, at all times, reflect the amount of additional margin, retained margin or other client funds held in respect of each client. (C) Signup and view all the answers

What does the provided text specify regarding a trading member granting a client relaxation or indulgence on margin payments and the loan's interest rate if no rate is specified?

The text says it will be at the trading member’s customary rate or, if there is no customary rate, at the rate determined in terms of the Prescribed Rate of Interest Act 55 of 1975. (B) Signup and view all the answers

A trading member gives a client 5 business days to meet a margin call due to unforeseen circumstances. According to the content, what action must the trading member take?

The trading member should immediately inform the client of the relaxation in writing. (C) Signup and view all the answers

According to the provided text, what is the maximum amount of cash that a trading member can knowingly accept as a deposit from any person without raising compliance concerns?

R5 000 (C) Signup and view all the answers

A client attempts to deposit two cash amounts of R4,000 each with a trading member on the same day. According to the rule, can the trading member accept these deposits and why?

No, because a trading member shall not receive or accept two or more amounts exceeding R5 000 in total. (C) Signup and view all the answers

What does a trading member need to do with the bank account that holds client’s additional margin?

It needs to be a separate bank account into which the trading member must deposit, or in which it must hold, any additional margin kept by it, any retained margin held on behalf of a client, or any other client funds held by the trading member. (C) Signup and view all the answers

With respect to additional margin and retained margin not deposited by a trading member with JSE Clear, where do the trading members' bank account provisions apply?

They apply in respect of additional margin and retained margin not deposited by a trading member with JSE Clear, and in respect of any other client funds held by a trading member. (A) Signup and view all the answers

What actions are trading members prohibited from in respect of the trades or positions of a trading member or client?

Retaining any money, securities or other corporeal or incorporeal things given by such trading member or client or received by the trading member on behalf of any person other than additional margin or retained margin contemplated in JSE Derivatives Rules. (A) Signup and view all the answers

Trading Member A wants to attract more clients and decides to offer a blanket waiver on initial margin requirements for all new clients for a limited promotional period. According to the text, what are the implications of this strategy?

Such a margin waiver would be deemed a loan repayable on demand, incurring interest, and must be disclosed to the client. (D) Signup and view all the answers

A trading member is approached by a potential client who wants to deposit R8,000 in cash to open an account. The client suggests splitting the deposit into two transactions of R4,000 each to comply with internal policies. What should the trading member do?

Suggest the client use an alternative payment method. (D) Signup and view all the answers

A trading member discovers a discrepancy between the amount of additional margin reflected in their records and the amount actually held for a particular client. Which course of action aligns best with the requirements outlined in the provided text?

The trading member's records should, at all times, reflect the correct amount of additional margin for each client. (C) Signup and view all the answers

According to the details provided, what is the JSE's policy regarding interest on margins held by JSE Clear?

JSE Clear retains an interest consideration, as determined and published in a notice. (D) Signup and view all the answers

A client of a trading member requests that their funds be co-mingled with the trading member's funds to potentially benefit from higher interest rates. Can the trading member legally fulfill this request?

No, trading members are prohibited from co-mingling client funds with their funds. (B) Signup and view all the answers

A trading member holds funds for its clients and also engages in proprietary trading. What guidelines must the trading follow, according to the content, to ensure compliance?

The trading member must separate client funds from its own assets. (A) Signup and view all the answers

In the context of managing client funds, what is the difference between 'corporeal' and 'incorporeal' things?

Corporeal refers to physical assets, while incorporeal refers to intangible assets. (B) Signup and view all the answers

A trading member that is also a bank is holding funds belonging to another trading member. According to the text, which of the following actions is permissible?

Holding the funds without separation. (B) Signup and view all the answers

How does JSE Clear's management of funds differ from that of a standard trading member regarding client assets?

JSE Clear can manage such margins and other moneys in a manner and subject to such terms and conditions as it sees fit, while trading members must adhere to strict separation and non-use guidelines. (B) Signup and view all the answers

A trading member decides to donate all interest earned on client margins to a local charity, arguing that it benefits the community. How does this align with the rules described in the text?

JSE Clear must retain an interest consideration, as determined and published in a notice. (D) Signup and view all the answers

According to the JSE Clear Rule 5.4.3, under what conditions may a clearing member require an exchange member to deposit additional margin?

With respect to the proprietary positions of the exchange member or positions of any of its clients, and an amount of additional margin is agreed upon between the parties in terms of the clearing agreement. (D) Signup and view all the answers

How should additional and retained margin held on behalf of a client be treated differently, according to trading member responsibilities?

The text does not address the difference. (B) Signup and view all the answers

Flashcards

JSE Clear's Fund Management

JSE Clear separates margins, securities, and funds of clearing members, trading members, and clients from its own assets. It manages and invests these funds according to its rules.

Additional Margin Deposits

Clearing members can deposit additional margin as per JSE Clear rule 5.4.3.