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Where aggregate indebtedness exceeds 600% of aggregate resources

Securities and Futures (Financial and Margin Requirements for Holders of Capital Markets Services Licences) Regulations

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—(1) The holder of a licence shall immediately notify the Authority, and the approved exchange or approved clearing house of which the holder is a member, if the aggregate indebtedness of the holder exceeds 600% of its aggregate resources.(2) Subject to paragraph (3), if an approved exchange or approved clearing house is notified by the holder under paragraph (1) or becomes aware that the aggregate indebtedness of the holder has exceeded 600% of the aggregate resources of the holder for 5 consecutive business days or more, the approved exchange or approved clearing house (as the case may be) may direct the holder to immediately do one or more of the following, and shall immediately notify the Authority of such direction:(a)submit the statements referred to in regulation 27(1) to the approved exchange or approved clearing house on a weekly basis or at such other interval as may be determined by the approved exchange or approved clearing house, until the aggregate indebtedness of the holder is equal to or less than 600% of the aggregate resources of the holder for 8 consecutive weeks or such other period as may be determined by the approved exchange or approved clearing house;(b)cease any increase in positions, product financing, funds accepted for management and assets accepted for custody for any account carried by the holder;(c)transfer all or part of any customer’s positions, margins, collateral, assets and accounts to one or more other holders of licences;(d)operate its business in such manner and on such conditions as the approved exchange or approved clearing house (as the case may be) may impose.(3) The Authority may —(a)review, affirm, modify or set aside any direction issued by an approved exchange or approved clearing house to the holder under paragraph (2); or(b)direct the holder to cease carrying on business in any or all of the regulated activities permitted under its licence until such time that the holder has demonstrated that its aggregate indebtedness is equal to or less than 600% of the aggregate resources of the holder, except that the holder may continue trading for the purposes of liquidation only or if otherwise directed by the Authority.(3A) Where an approved exchange or approved clearing house informs the Authority that the holder of a licence has failed to comply with any direction given to it under paragraph (2), the Authority may, if it thinks necessary or expedient, direct the holder of the licence to comply with that direction, within such time as may be specified by the Authority and subject to such modifications that the Authority may make to the direction.(4) Any statement required to be submitted under paragraph (2)(a) shall be —(a)signed by a director of the holder or such other person as the Authority may allow; and(b)lodged with the approved exchange or approved clearing house of which the holder is a member not later than one business day after the end of the week or other interval referred to in paragraph (2)(a).(5) The Authority may revoke the licence of the holder under section 95(2) of the Act if the holder fails to comply with a direction issued to it under paragraph (2), (3)(b) or (3A).

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