With the FSA’s continued insistence on proper segregation of clients’ funds and separation of client monies it was only a matter of time before providers were forced to change their clients’ account policies to respect the guidelines as set out by the UK’s Financial Services Authority. CMC Markets have sent a circular to their clients informing them of a change to their CFD terms and conditions where it makes clear that if you are a retail client, they will hold funds equal to your total equity in a segregated bank account – this essentially means that the money is fully protected even in the circumstance that CMC Markets UK plc were to become insolvent.
We are writing to you to notify you of changes we are making to our CFD Terms of Business (the “Terms”) pursuant to a change in the FSA’s rules about how we hold money belonging to retail clients.
Under that change, we are required to hold our retail clients’ margin monies in a segregated client bank account in addition to clients’ free equity. Therefore, from 1 January 2011 and if you are a retail client, we will hold funds equal to your total equity (as displayed on the platform) in a segregated bank account. This means that your money is fully protected in the event that CMC Markets UK plc becomes insolvent.
Under the Terms we are required to provide you with at least 10 business days notice of any changes to the agreement between us. However, because this is a change to regulations which override the Terms, that notice period becomes irrelevant in terms of the change to how we hold your money.
Therefore, the change to how we hold client money will take effect from 1 January 2011 even though the changes to the Terms set out below will only take effect from 12th January 2011.
The change to the Terms is as follows:
Clause 10, entitled ‘Your Money’, is entirely deleted and replaced with the following:
|10. Your Money|
|10.1||If we have categorised you as a retail client, in accordance with applicable law and subject to clauses 10.3 and 10.4, we will place an amount equivalent to your Total Equity (as displayed on the platform) into a client money bank account.|
|10.2||If we have categorised you as a professional client or an eligible counterparty, we will acquire full ownership of all amounts received by us from you, or credited by us to your Account. This money is used to cover your potential liabilities to us under the Agreement. Such money does not constitute client money for the purposes of the FSA Rules and so will not be segregated from money held in our own account(s) and may be used by us in the course of our business. You will rank as a general creditor of us in respect of this money in the event of our insolvency.|
|10.3||We will carry out reconciliations at the close of business on each Business Day between money required to be held in the client money bank account and money that may be held in our own account in accordance with the FSA Rules, and any required transfer to or from the client money bank account in respect of your Account will take place on the following Business Day. We may carry out such reconciliations and transfers more frequently, should we reasonably consider that this is necessary to protect our or your interests.|
|10.4||If we have categorised you as a retail client, you agree that we may cease to treat any money held on your behalf as client money and release it from our client money bank account(s), if you have no positions and have not placed a trade in the previous six (6) years, and we have been unable to contact you. Such money will, however, remain owing to you and we will make and retain records of all balances released from client money bank accounts under this clause and will undertake to make good any valid claims against such released balances.|
|10.5||Except in the case of fraudulent activity carried on, without your knowledge, by a person other than you, we do not accept responsibility for any loss or damage suffered by you as a result of you trading on money placed in or credited to your Account in error by or on our behalf. We will be entitled at any time to deduct, without notice or recourse to you, any money placed in or credited to your Account in error by us or on our behalf.|
|10.6||We will not pay interest to you on any money held on your behalf or otherwise under clauses 10.1, 10.2 or 10.4.|
|10.7||If there is a debit balance on your Account, then you will pay interest to us on the full amount of that balance at such rate as we may determine from time to time.|
|10.8||Depending on your status and the circumstances of your claim, you may be entitled to compensation from the Financial Services Compensation Scheme if we cannot meet our obligations, in which case you would receive full compensation for any successful claim subject to maximum compensation of £50,000. Further information about compensation arrangements is available from the Financial Services Compensation Scheme, 7th Floor, Lloyds Chambers, Portsoken Street, London E1 8BN (www.fscs.org.uk).|