SECURITIES & EXCHANGE COMMISSION GHANA

COMPLIANCE MANUAL

FOR BROKER-DEALERS, INVESTMENT ADVISERS & REPRESENTATIVES

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INTRODUCTION

This Compliance Manual hereinafter referred to as the 'Manual' is issued by the Securities & Exchange Commission in pursuance of Section 9 of the Securities Industry Act, 1993 (PNDCL 333).

Part I deals with the legal status, structure, organization and capitalization of a broker-dealer or investment adviser.

Part II covers matters pertaining to dealings with clients and the custody of securities.

The rules governing trades in securities, clearing and settlement are contained in Part III of the Compliance Manual.

Part IV elaborates on dealings of broker-dealers and investment advisers as principals and further expatiates on staff trades and prohibited trading practices.

Accounting records, financial management and reporting and audit are contained in Part V of the Compliance Manual.

Part VI deals with staffing and control guidelines in respect of broker-dealers and investment advisers licensed to manage securities.

Supervisory procedures which are to be put in place by broker-dealers and investment advisers are contained in Part VII of the Manual. This section also deals with Compliance Officers and various registers that are to be maintained by broker-dealers and investment advisers.

Clauses on research, sales literature and advertising can be found in Part VIII of the Manual.

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Part IX deals with disclosure of information by issuers of securities.

Part X establishes the principles of conduct to be adhered to by investment professionals and

Finally, Part XI refers to sanctions or disciplinary action to be taken by the Commission for non-compliance with the provisions of the Manual.

The Manual identifies the salient regulatory obligations required of broker-dealers and investment advisers, broker-dealers' representatives and investment advisers' representatives licensed in accordance with the Law. It also identifies and prescribes the systems which need to be established by every broker-dealer in securities and every investment adviser to ensure the orderly and efficient conduct of business; the safe-guarding of assets; the management of both financial and systemic risk; reliable and timely record keeping.

The Manual covers the areas of the structure and operations of a broker-dealer and an investment adviser that are deemed crucial to the maintenance and preservation of the financial standing and integrity of the broker-dealer or investment adviser. It includes areas such as, the constitution and regulations of the broker-dealer or investment adviser, organizational structure, internal controls and supervision, competence and qualifications of staff; dealings with

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clients, order receipts and execution procedures; sales practices, research, advertisement of services, accounts and records and compliance with applicable laws, rules and regulations.

The Manual also specifies the standards of conduct required of investment professionals in the securities industry such as broker-dealers, broker-dealer's representatives; investment advisers and investment adviser's representatives licensed in accordance with the Law.

It is emphasised that the Manual proposes the minimum structures, standards and procedures that need to be established to ensure the achievement of the accepted objectives and principles of securities regulation.

This Manual does not preclude the further development of policies and procedures for regulated bodies provided such development is within the ambit of the Law and the objectives and principles referred to above.

In respect of the breach of any provisions of the Compliance Manual, the Commission reserves the right to impose any sanctions that it deems appropriate in the circumstances and in accordance with section 23 of PNDCL 333.

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Reference is made throughout the Manual to various sections of the Securities Industry Act, 1993 (PNDCL 333), Securities Industry (Amendment) Act, 2000 (Act 590) and the Securities and Exchange Commission Regulations, 2003 (L.I.1728) upon which the provisions of the Manual are based. These references are made only for ease of reference, and for the convenience and guidance of users. Users are advised to read the Law itself for a fuller understanding of any specific legal provision.

Dr. Nii Kwaku Sowa
DIRECTOR-GENERAL

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TABLE OF CONTENTS

INTRODUCTION ................................................................................................................. 2

PART I - STRUCTURE, ORGANISATION & CAPITALIZATION
OF A BROKER-DEALER OR INVESTMENT ADVISER ................................................. 18

SECTION A - LEGAL STATUS OF A BROKER-DEALER
OR INVESTMENT ADVISER ............................................................................................ 18

1. Legal Status and Licensing Requirements for Investment Advisers
   & Broker-Dealers ................................................................................................................. 18
2. Licences ............................................................................................................................. 18
3. Regulations of Broker-Dealers or Investment Advisers ................................................. 20
4. Exclusivity of Business of a Broker-Dealer or Investment Adviser ............................. 20
5. Provisions Pertaining to Directors of a Broker-Dealer
   or Investment Adviser ......................................................................................................... 21
6. Notification of Changes in Particulars ........................................................................... 21
7. Penalties for Non Compliance ......................................................................................... 23

SECTION B - ORGANISATIONAL PLAN ....................................................................... 23

1. Organisational Structure .................................................................................................. 23
2. Organisational Chart ........................................................................................................ 24
3. Back Office Process Flow Chart ...................................................................................... 24

SECTION C - CAPITALIZATION OF BROKER-DEALERS
AND INVESTMENT ADVISERS ...................................................................................... 25

1. Capitalization Requirements for Broker-Dealers & Investment Advisers ................... 25
2. Issued and Paid up Capital .............................................................................................. 25
3. Maintenance of Capital ..................................................................................................... 26
4. Monitoring of Liquidity and Additional Infusions ......................................................... 27
5. Penalties for Non-compliance .......................................................................................... 27
6. Computation of Liquid Funds .......................................................................................... 27

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PART II - MATTERS PERTAINING TO DEALINGS WITH
CLIENTS & THE CUSTODY OF SECURITIES .............................................................. 28

SECTION D - DEALING WITH CLIENTS ........................................................................ 28

1. The Know Your Client Concept ....................................................................................... 28
2. Opening of New Accounts ............................................................................................... 30
3. Guidelines On Acceptance of Money from Clients ........................................................ 32
4. Dealing with Client Monies ............................................................................................. 33
5. Penalty ............................................................................................................................... 34
6. Deposits from Clients ....................................................................................................... 34
7. Client Documentation and Records ................................................................................ 35
8. Guidelines for Discretionary Accounts ........................................................................... 37
9. Minimum Requirements for Opening Discretionary Accounts .................................... 38
10. Managed Accounts .......................................................................................................... 39
11. Client Statements ............................................................................................................ 40
12. Communications to Clients ............................................................................................ 41

SECTION E - CUSTODY AND CONTROL OF SECURITIES

1. Procedures for the Receipt, Custody and Delivery of Securities ................................. 42
2. Register of Securities ........................................................................................................ 42
3. Notification of Particulars of Register of Interests in Securities .................................. 45
4. Control over the Movement of Securities ....................................................................... 46
5. Custody and Storage of Securities ................................................................................... 47
6. Securities Inventory .......................................................................................................... 47
7. Provisions Relating to Securities Documents in the
   Custody of Broker-dealer .................................................................................................... 48
8. Dividends and Interests .................................................................................................... 49

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PART III - TRADING, CLEARING AND SETTLEMENT ............................................... 51

SECTION F - TRADING ..................................................................................................... 51
SECTION G - CLEARING AND SETTLEMENT OF SECURITIES

1. Clearing House Rules ....................................................................................................... 51

PART IV - DEALINGS AS PRINCIPAL, STAFF TRADES AND
PROHIBITED TRADING PRACTICES ............................................................................ 52

SECTION H - DEALINGS BY THE BROKER-DEALER OR INVESTMENT ADVISER AS PRINCIPAL

1. Prohibitions and Notifications ......................................................................................... 52
2. Priority ............................................................................................................................... 53
3. Separations and Chinese Walls ........................................................................................ 53

SECTION I - STAFF TRADES ........................................................................................... 54

1. Trading to be done through Employing Broker-dealer .................................................. 54
2. Prior Authorization ........................................................................................................... 55
3. Restricted List ................................................................................................................... 55
4. Dealings by Employees of an Investment Adviser ......................................................... 55
5. Restrictions on Staff Trades ............................................................................................. 56

SECTION J - PROHIBITED TRADING PRACTICES

1. Fraud in Connection with the Purchase or Sale of Securities ....................................... 56
2. Acts Committed to Create a False or Misleading Market in Securities ....................... 57
3. Sales Involving No Change in Beneficial Ownership .................................................... 58

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PART V - ACCOUNTING RECORDS, FINANCIAL MANAGEMENT,
REPORTING AND AUDIT ................................................................................................ 60

SECTION K - FINANCIAL OPERATIONS ...................................................................... 60

1. Bank Accounts .................................................................................................................. 60
2. Segregation of Client Funds ............................................................................................ 61
3. Custody and Handling of Funds ...................................................................................... 62
4. The Issuance of Cheques .................................................................................................. 63

SECTION L - ACCOUNTING FUNCTIONS .................................................................... 64

1. Accounts of a Broker-Dealer or Investment Adviser ..................................................... 64
2. Information and Accounting Records to be maintained
   by a Broker-Dealer .............................................................................................................. 65
3. Accounting Records to be maintained by an Investment Adviser ................................ 68
4. Separation of Records ...................................................................................................... 69
5. Reconciliation of Bank Accounts .................................................................................... 70
6. Dividend and Interest Accounts ....................................................................................... 70
7. Commissions ..................................................................................................................... 71
8. Journal Entries .................................................................................................................. 71
9. Customer Settlement ........................................................................................................ 72
10. Monies due to Clients ..................................................................................................... 73
11. Margin Facilities and Credit offered by the Broker-Dealer ........................................ 74

SECTION M - FINANCIAL MANAGEMENT AND REPORTING

1. Budgetary Controls ........................................................................................................... 75
2. Financial Statements by Broker-Dealer .......................................................................... 75

SECTION N - AUDIT

1. Requirement of an Annual Audit .................................................................................... 77
2. Appointment ,Removal and Resignation of an Auditor ................................................ 77

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3. Auditor's Report on any Prescribed matters .................................................................. 78

PART VI - STAFFING AND CONTROL GUIDELINES ................................................. 80

SECTION O - STAFF .......................................................................................................... 80

1. Qualifications .................................................................................................................... 80
2. Background Checks ........................................................................................................... 80
3. Knowledge of the Internal Procedures ............................................................................ 82
4. Awareness of Law, Rules and Regulations .................................................................... 82
5. Training ............................................................................................................................. 83
6. Reporting ........................................................................................................................... 83
7. Termination ....................................................................................................................... 84

SECTION P - BRANCHES AND AGENTS ...................................................................... 84

1. Qualifications of an Agent ............................................................................................... 84
2. Notification of Appointment and Termination .............................................................. 85
3. Conditions of Appointment .............................................................................................. 85
4. Obligations arising from the Agency .............................................................................. 86
5. Branch Offices .................................................................................................................. 87

SECTION Q - OTHER CONTROL GUIDELINES .......................................................... 88

1. Division/Segregation of Duties ....................................................................................... 88
2. Forms Control ................................................................................................................... 89
3. Retention and Destruction of Records ............................................................................ 90
4. Signatories ......................................................................................................................... 90
5. Returned Documents ........................................................................................................ 91
6. Computer Controls, IT Administration and Protection ................................................. 91

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PART VII - SUPERVISION AND COMPLIANCE .......................................................... 94

SECTION R - SUPERVISION ........................................................................................... 94

1. Procedures ......................................................................................................................... 94
2. Monitoring the Supervisors ............................................................................................. 94
3. Supervision of Trading Activities of Directors and Employees ................................... 95
4. Supervision of Dealings with Clients ............................................................................. 95

SECTION S - COMPLIANCE OFFICERS ....................................................................... 96

1. The Requirement for a Compliance Officer ................................................................... 96
2. Qualifications and Licensing ........................................................................................... 96
3. Responsibility .................................................................................................................... 97
4. Reporting ........................................................................................................................... 97
5. The Review of Trading by Directors, Employees and Agents ...................................... 97
6. Penalty for Non-Compliance with Part S Sections 1-5 ................................................. 98
7. Notification of Changes in Particulars ........................................................................... 99
8. Sanctions for Failure to Notify Commission of Changes in Particulars ...................... 99
9. Review of Client Trading ................................................................................................ 99
10. Review of Client Records .............................................................................................. 100
11. Review of Client Accounting ........................................................................................ 100
12. Review of Payments to Clients ...................................................................................... 101
13. Review of Discretionary or Managed Accounts .......................................................... 102
14. Review of Trust Accounts .............................................................................................. 102

SECTION T - OTHER REGISTERS TO BE MAINTAINED ......................................... 102

1. Register of Interests in Securities ................................................................................... 102
2. Complaints Register and Procedure ............................................................................... 105
3. Penalties for failure to adhere to Compliance rules ...................................................... 107

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PART VIII - RESEARCH, SALES LITERATURE AND ADVERTISING 108

SECTION U - RESEARCH ................................................................................................. 108

1. Requirements of Research Reports ................................................................................. 108
2. Vetting and Supervision .................................................................................................. 109
3. Retention of Research Materials ..................................................................................... 110

SECTION V - SALES LITERATURE AND ADVERTISING ....................................... 110

1. Compliance, Supervision and Records ........................................................................... 110
2. General Principles ............................................................................................................ 111
3. Prohibitions ....................................................................................................................... 112

PART IX - DISCLOSURE OF INFORMATION BY ISSUERS
OF SECURITIES ................................................................................................................ 116

1. Invitations to the Public .................................................................................................. 116
2. Supplementary prospectus or supplementary offer document ..................................... 117
3. Power of the Commission to extend, re-open or cancel the offer ............................... 118
4. Annual Reports ................................................................................................................. 119
5. Quarterly Financial Statements on corporate securities ............................................... 119
6. Contents of Quarterly Financial Statements .................................................................. 121
7. Sworn Statement ............................................................................................................... 124
8. Review of Financial Statements ...................................................................................... 124
9. Investigation of accounting matters by the Commission ............................................. 125
10. Obligation to disclose information ............................................................................... 125
11. Audit sub-committee ...................................................................................................... 128
12. Penalty ............................................................................................................................. 128

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PART X - PRINCIPLES OF CONDUCT TO BE ADHERED
TO BY INVESTMENT PROFESSIONALS ..................................................................... 130

1. Investment Professionals ................................................................................................. 130
2. Proper Business Conduct ................................................................................................. 130
3. Standards of Ethical and Professional Conduct of
   Investment Professionals ..................................................................................................... 130
4. Know Your Client ............................................................................................................ 131
5. Knowledge and Compliance ........................................................................................... 131
6. Professional Misconduct and the Prohibition on Assisting
   Illegal and Ethical Violations ............................................................................................. 132
7. Use of Material Non-public Information ....................................................................... 132
8. Responsibility of Supervisors ......................................................................................... 133
9. Suitability of Recommendations ..................................................................................... 134
10. Withholding of Information .......................................................................................... 135
11. Prohibition against Misrepresentation of Services and
    Investment Performance ...................................................................................................... 135
12. Client Accounting and Records .................................................................................... 136
13. Guaranteeing Client against Loss ................................................................................. 136
14. Sharing in Client's Profits or Losses ............................................................................ 137
15. Declaration of Interests in Securities ............................................................................ 137
16. The Need to Subscribe to Written Communications .................................................... 138
17. Execution of Client Orders ........................................................................................... 138
18. Research .......................................................................................................................... 139
19. Priority of Transactions ................................................................................................. 139
20. Compensation ................................................................................................................. 140
21. Disclosure of Referral Fees ........................................................................................... 140
22. Duty to Employer ........................................................................................................... 141
23. Preservation of Confidentiality ..................................................................................... 141
24. Sanctions for Misconduct .............................................................................................. 142

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PART XI - SANCTION FOR NON-COMPLIANCE ....................................................... 144

APPENDICES

Appendix 1 ............................................................................................................................ 146
Appendix 2 ............................................................................................................................ 150

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DEFINITIONS

In this Manual the following definitions shall apply –

"Advertisement" - shall include any public notice or announcement and every form of advertisement whether it be by way of publication or by display of notices or by means of circulars or other documents or by an exhibition of photographs or films or videos or discs or by way of sound broadcasting or television or on computer screens or in any other manner.

"Agent" – any reference to an agent shall include broker-dealer's representatives, investment adviser's representatives and investment representatives employed by the broker-dealer either directly or indirectly, the nominees of such persons and persons associated with such persons.

"Associated Person" - any reference to a person being associated with another person shall be construed in accordance with provisions of Section 143 of the Securities Industry Act, 1993 (PNDCL 333).

"Chinese Wall" - shall mean and include any procedure or compliance system which is designed to prevent the communication of material non-public information within a broker-dealer or investment adviser that is a firm or company or between a broker-dealer or investment adviser and an associated, connected or related person.

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"Commission" - means the Securities & Exchange Commission established under the Securities Industry Act, 1993 PNDCL 333 its successors and assigns.

"Companies Act" - means the Companies Act, 1963 (Act 179)

"Connected Person" - any reference to a person being connected with another shall be construed in accordance with the provisions of Section 128(8) of the Securities Industry Act, 1993 (PNDCL 333).

"Broker-Dealer" - "Broker-Dealer's Representative", "Investment Adviser" and "Investment Adviser's Representative" shall have the same meaning as in the Securities Industry Act, 1993 (PNDCL 333) as amended by Securities Industry (Amendment) Act 2000, (Act 590).

"Employees" – shall include all directors and employees of the broker-dealer, investment adviser, broker-dealer's representative and investment representative, the nominees of such persons and persons associated with such persons.

"Interest in Securities" any reference to a person having an interest in a security shall be construed in accordance with the provisions of Section 143 of the Securities Industry Act, 1993 (PNDCL 333).

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"Law" means the Securities Industry Act, 1993 (PNDCL 333) as amended by the Securities Industry (Amendment) Act 2000, (Act 590) and the Securities and Exchange Commission Regulations, 2003, (L.I. 1728) and any amendments to the preceding legislations.

"Material Non-Public Information" in relation to securities shall mean information that is not generally available but, if it were, might materially affect the price of those securities.

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[IMAGE]

PART I

STRUCTURE, ORGANISATION

AND CAPITALIZATION

OF A BROKER-DEALER

OR INVESTMENT ADVISER

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PART I - STRUCTURE, ORGANISATION AND CAPITALIZATION

OF A BROKER-DEALER OR INVESTMENT ADVISER

SECTION A - LEGAL STATUS OF A BROKER-DEALER

OR INVESTMENT ADVISER

1. Legal Status and Licensing Requirements for

Investment Advisers & Broker-dealers

(a) Every Broker-Dealer in securities shall be a body corporate created and registered in accordance with the Companies Act 1963 (Act 179) including an incorporated private partnership. (PNDCL.333 s53, L.I. 1728 reg. 17.)

(b) An Investment Adviser shall either be an individual or a body corporate created and registered in accordance with the Companies Act 1963 (Act 179) including an incorporated private partnership (PNDCL.333 s50, L.I. 1728 reg. 17.)

2. Licences

(a) All broker-dealers and investment advisers shall hold a valid broker-dealer's or investment adviser's

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licence issued in accordance with the Law (PNDCL 333 ss. 48 and 50).

(b) Every person in the direct employment of or acting for or by arrangement with a broker-dealer or investment adviser who performs for the broker-dealer or investment adviser any of the functions of a broker-dealer (other than the work ordinarily performed by accountants, clerks or cashiers) whether his remuneration is by way of salary, wages, commission or otherwise including a director or officer of a broker-dealer or investment adviser that is a body corporate who performs any of the said functions for that body shall be the holder of a valid broker-dealer's representative or investment adviser's representative licence issued in accordance with the Act. (PNDCL 333 s. 142)

(c) Additionally, all broker-dealers shall hold valid licences as licensed dealing members in an approved stock exchange or an alternative securities exchange in Ghana.

(d) All representatives of the broker-dealer shall be registered as authorized dealing officers approved by that stock exchange or alternative securities exchanges in Ghana.

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3. Regulations of Broker-Dealers or Investment Advisers

(a) The regulations of a broker-dealer or an investment adviser company shall authorise the broker-dealer or investment adviser to engage in the business it is licensed to engage in.

(b) Changes in the regulations of a dealer or investment adviser shall be in accordance with the Companies Act and subject to the approval of the Commission. (L.I.1728 reg. 18).

4. Exclusivity of Business of a Broker-Dealer or

Investment Adviser

(a) The sole business of :-
(i) every broker-dealer should be that of dealing in securities and the business activities relevant to such dealings; (ii) every investment adviser should be that of:

• advising others concerning securities; or
• publishing analyses or reports concerning securities; or
• undertaking the management of portfolios of securities for the purpose of investment on behalf of another; or

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• a combination of the above mentioned activities.

(b) A broker-dealer or investment adviser should not engage in any other business and should not have any direct or indirect interest in any other company other than interests acquired in the conduct of the business of dealing in securities without the written approval of the Commission and the stock exchange of which the dealer is a member.

5. Provisions Pertaining to Directors of a Broker-Dealer

or Investment Adviser

Every director of a broker-dealer or an investment adviser firm shall be a person of good repute and character and shall possess the highest business integrity (L.I. 1728 reg. (3),(4) & (5)).

6. Notification of Changes in Particulars

(a) Notification of any changes in particulars in the constitution, legal status, regulations, shareholdings, directors, operations and general business of the broker-dealer or investment adviser shall be filed promptly and in any event within the time frames specified by the applicable law or regulation with:-

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(i) the Commission;
(ii) the stock exchange of which the broker-dealer is a member; and (iii) any other public regulatory authorities if such a requirement exists.

The broker-dealer or investment adviser shall maintain records of such notifications and filings which shall be up to date and available for inspection by the relevant authorities, the Commission and the Stock Exchange (PNDCL 333 s. 60, L.I. 1728 reg. 18).

(b) No change shall be effected to the regulations of a broker-dealer or investment adviser without the prior written approval of the Commission and the stock exchange of which the broker-dealer is a member.

(c) Broker-dealers and investment advisers, shall notify the Commission of any change of particulars regarding the status of broker-dealers and investment advisers and their representatives as compared to that submitted in the application for a licence and any further change, within fourteen days of the change (L.I.1728 reg.18)

(d) The notification shall be in the form and contain the particulars specified in Form SEC C of sch. 3 of L.I. 1728.

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7. Penalties for Non Compliance (L.I. 1728 reg. 19(1)).

(1) Any person who carries on the business of a broker dealer, investment adviser, stock exchange, broker-dealer's representative or investment representative without obtaining a licence from the Commission is liable to pay the following penalties:- Broker-Dealer/Investment Adviser – GH¢3,000 Stock Exchange – GH¢5,000 Broker-dealer Representative or Investment Representative – GH¢1,200

(2) Any person who fails to notify the Commission of any change of particulars as required by paragraph 3(c) is liable to a penalty of GH¢50 for each day that the default subsists and shall have its licence suspended if the period of default exceeds 30 days (L.I. 1728 reg. 19(2)).

SECTION B - ORGANISATIONAL PLAN

1. Organisational Structure

(a) Every broker-dealer or investment adviser shall be structurally organised in a manner that provides for a clear division of functions and responsibilities and a delineation of duties within the organisation.

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(b) The organisational structure of the broker-dealer or investment adviser shall lend itself to efficient management, supervision and oversight.

2. Organisational Chart

Every broker-dealer or investment adviser shall design an organisational chart depicting the structure of the organisation and the division of responsibilities and functions, duly approved by the board of directors or governing board of the broker-dealer or investment adviser, which shall be available for regulatory inspection.

3. Back Office Process Flow Chart

Every broker-dealer and investment adviser shall develop a work process flow chart depicting the system being employed, duly approved by the board of directors or governing board of the broker-dealer or investment adviser, which shall be available for regulatory inspection.

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SECTION C - CAPITALIZATION OF BROKER-DEALERS

AND INVESTMENT ADVISERS

1. Capitalization Requirements for Broker-dealers

& Investment Advisers

In the case of a broker-dealer or investment adviser that is a company its stated capital shall consist of fully paid up shares.

2. Issued and Paid up Capital

(a) Every broker-dealer and investment adviser shall be adequately capitalized in accordance with the activities it performs and the services it provides in the market with a view to not only reducing the financial risk such broker-dealer introduces to the market by way of its dealings but also ensuring the maintenance of an appropriate quality of services by the broker-dealer and the investment adviser to market participants and investors.

(b) Every broker-dealer and investment adviser shall adhere to the minimum issued and paid up capital requirements that may be specified from time to time by the Commission and/or the stock exchange of which the broker-dealer is a member.

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3. Maintenance of Capital

(a) Broker-dealers or investment advisers licensed by the Commission are required to have and maintain at any given time the minimum liquid funds amounting to a percentage of the aggregate indebtedness of the broker-dealer or investment adviser as determined by circular from time to time by the Commission. (L.I. 1728 reg. 22)

(b) Every broker-dealer and investment adviser shall maintain at all times the minimum capital specified and a broker-dealer in addition shall maintain the minimum liquid funds or net capital required by regulations issued by the Commission or the stock exchange of which it is a member.

(c) The consistent maintenance of the capitalization and liquidity within the limits specified by regulations issued by the Commission and/or the stock exchange shall be the obligation of the broker-dealer and investment adviser (L.I. 1728 reg. 22 & 23).

(d) Any shortfall shall be reported within five (5) working days to the Commission and the stock exchange of which the broker-dealer is a member.

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4. Monitoring of Liquidity and Additional Infusions

(a) Every broker-dealer and investment adviser shall monitor its liquid funds or net capital on a regular basis. Additional infusions of funds shall be introduced whenever liquid funds fall below the minimum specified within 3 business days of the shortfall arising (L.I. 1728 reg. 23(1)).

(b) Every broker-dealer and investment adviser is required to notify the Commission and stock exchange of which it is a member when its liquid funds fall below the minimum specified.

5. Penalties for non-compliance

Any broker-dealer or investment adviser who fails to introduce additional funds within the time specified is liable to pay a penalty of GH¢500 for each day the default subsists and shall have its licence suspended if the period of default exceeds 30 days (L.I. 1728 reg. 23 (1)).

6. Computation of Liquid Funds

The computation of the liquid funds of a broker-dealer or net capital shall be in accordance with the regulations and directives issued by the Commission and/or the stock exchange of which the broker-dealer is a member (L.I. 1728 reg. 27 (7)).

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PART II

MATTERS PERTAINING TO

DEALINGS WITH CLIENTS & THE

CUSTODY OF SECURITIES

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PART II - MATTERS PERTAINING TO DEALINGS WITH

CLIENTS & THE CUSTODY OF SECURITIES

SECTION D - DEALING WITH CLIENTS

1. The Know Your Client Concept

(a) Every broker-dealer and investment adviser shall establish procedures to obtain and maintain complete information on each of its clients.

(b) This information shall:-
(i) form the basis of the broker-dealer's or investment adviser's database on the client; (ii) be used to govern and influence the appropriateness of investment advice given and recommendations made to a client; (iii) influence the extension of credit facilities and other financial accommodation to the client where authorised.

(c) The initial step towards compliance with this concept is the obtaining of comprehensive information and the completion of relevant documentation when opening new client accounts. The Commission may from time to time prescribe Know-Your-Client forms to be used by broker-

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dealers and investment advisers for this purpose.

(d) Broker-dealers and investment advisers shall ensure compliance with the following:- (i) Identify the customer and verify the customer's identity using reliable, independent sources, documentation or information; (ii) Identify the beneficial owner such that the institution is satisfied that it knows who the beneficial owner is. For legal persons and arrangements this shall include broker-dealers or investment advisers taking reasonable measures to understand the ownership and control structure of the customer (i.e. a Trust or where purchases are made by individuals and held on their behalf by other individuals); (iii) Obtain information on the purpose and intended nature of the business relationship and conduct on-going due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with the broker-dealer or institution's

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knowledge of the customer, their business and risk profile, including where necessary the source of the funds.

2. Opening of New Accounts.

(a) Broker-dealer's or investment adviser's representatives shall ensure the accurate completion of documentation when opening a new client account and shall have overall responsibility for obtaining all required account documentation.

(b) The following documentation shall be on file prior to the acceptance of an order from a client:-

I. A client account form containing the following minimum data:-
(i) the name of the client and in the case of a corporate body its name and registration number; (ii) the age of the client in the case of an individual; (iii) the client's mailing address and contact information such as location of corporate office, telephone/fax numbers and email address if available;

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(iv) the client's investment knowledge;
(v) the client's investment objectives;
(vi) the client's specimen signature.

II. Additional legal documentation as needed to identify the legal responsibility for trading decisions and guarantees of payment and settlement.

(c) The acceptance of the new account shall be authorized by a designated person in a managerial position in the broker-dealer or investment adviser organisation.

(d) All client account documentation shall be signed by the following persons prior to the initial order being accepted:
(i) the client;
(ii) the broker-dealer's representative or investment adviser's representative handling the opening of the account; (iii) the manager responsible for authorizing the opening of the account, unless the broker-dealer or investment adviser's representative has been given express written authority to be the authorizing officer.

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(e) In the case of a broker-dealer, all formats of client account documentation used shall be approved by the stock exchange of which the broker-dealer is a member.

(3) Guidelines on acceptance of Money from Clients

(PNDCL 333 ss. 80 and 85 L.I. 1728 reg. 24)

(a) All monies received or obtained from a client by a broker-dealer or investment adviser licensed to manage securities shall be evidenced by a document setting out:- (i) the name and address of the client from whom money is received or obtained; (ii) the manner of payment and details of the instrument of payment; (iii) the amount received; (iv) the purpose for which the money may be used; (v) the duration for which the money will be held; (vi) interest payable on unutilized balances and the quantum, method and frequency of such payment if applicable; (vii) any other conditions material or relevant to the acceptance of the funds obtained;

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(viii) Outstanding order list.

(b) The original of the document shall be furnished to the client and a written acknowledgement received from the client confirming the receipt of the document and the acceptance of the terms and conditions specified therein prior to the funds being used (PNDCL 333 s.80).

(c) A receipt acknowledging payment of monies shall be dispatched to the client within 3 working days of concluding the transaction.

4. Dealing with client monies

(PNDCL 333 s. 80)

Where a client deposits money with or lends money to a broker-dealer, the broker-dealer shall :- (a) deposit the money in an account in a bank, not later than the next day on which the bank is open for business after the receipt of the money and the account shall not contain any money other than money deposited with or lent to the broker-dealer; (b) furnish the client with a document, in the prescribed form, setting out the terms and conditions on which the deposit or loan is made and accepted, including

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the purpose for which and the manner in which the money is to be used by the broker-dealer; (c) retain the money in the bank account until the client gives him a written statement acknowledging that the client has received the document referred to in paragraph (b); and (d) use the money only for the purpose and in the manner set out in the document or for a purpose or in a manner agreed to by the client in writing after the document was furnished to the client.

5. Penalty

A person who contravenes the above commits an offence and is liable on conviction to a fine not exceeding GH¢100 or to imprisonment for a term not exceeding one year or to both; and shall in addition be liable to refund the money together with interest at the prevailing commercial bank rate to the client (PNDCL. 333 s.80).

6. Deposits from clients

(a) No broker-dealer or investment adviser shall utilise any money received from a client as a deposit unless the broker-dealer or the investment adviser has furnished the client with a document in the form

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which contains the particulars specified in Form SEC F of Schedule 3 of the Securities and Exchange Commission Regulations, 2003 setting out the terms and conditions on which the deposit is made and accepted including the purpose for which and the manner in which the money is to be used by the broker-dealer or the investment adviser; and until the client has acknowledged receipt in writing of the document mentioned in regulation (a).

(b) Money received by a broker-dealer or investment adviser from a client shall be lodged in an account designated as a Trust Account in accordance with PNDCL 333 s. 85.

(c) Broker-dealers and investment advisers shall keep duplicate copies of Form SEC F and written acknowledgement of their terms and conditions for inspection purposes (reg. 24(1) L.I.1728).

7. Client Documentation and Records

(a) Client documentation shall comprise of a client master file under the control of a person of managerial grade.

(b) Broker-dealer's representatives and investment adviser's representatives shall be provided with a sub-file containing copies of relevant data and documentation.

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(c) In addition to the original account opening form, the legal documentation and documentation issued in connection with accepting money from a client, the master file shall contain the following records:- (i) client correspondence; (ii) the latest client account statement; (iii) the year-end position; (iv) copies of confirmations of trades; (v) delivery and trading instructions; (vi) outstanding order list.

(d) All entries and amendments in the master file shall be evidenced by proper documentation.

(e) Documentation in a client file shall be updated within a week, whenever there is a material change in client information.

(f) Any material change in the particulars of the information contained in the file shall be authorized by the manager responsible for supervising the account. Such changes may include a change of address, a change of payment instructions or the account being converted into a discretionary or managed account.

(g) Every broker-dealer and investment adviser shall establish procedures to ensure that:- (i) information in client files is accurate and up to date;

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(ii) all supporting documentation is received within a reasonable period of time from the opening of the account; (iii) incomplete documentation is noted and steps taken to obtain the same; (iv) documentation that remains incomplete after a period of 30 days from the opening of the account is brought to the notice of the management.

8. Guidelines for Discretionary Accounts

(a) Discretionary accounts are accounts for which a client has given trading authority to the broker-dealer to engage in a particular securities transaction or a series of securities transactions without reference to the client.

(b) All broker-dealers who undertake to operate client accounts on a discretionary basis shall set out in writing the terms and conditions under which the account is to be operated.

(c) The documentation pertaining to the discretionary account and the opening of a discretionary account must be approved by the head of brokerage of the broker-dealer or an officer of equivalent seniority.

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(d) No broker-dealer or broker-dealer's representative shall exercise any discretionary power on behalf of a client to purchase or sell securities without the client's prior written subscription to and acknowledgement of the terms and conditions referred to above.

9. Minimum Requirements for Opening

Discretionary Accounts

(a) The minimum requirements for opening a discretionary account shall include the following stipulations:-

(i) all orders for discretionary accounts shall be identified as such at the time of entry to the trading system of the stock exchange; (ii) all discretionary accounts shall receive quarterly supervisory reviews of performance to ensure that the accounts are being handled in accordance with the investment objectives and financial well-being of the client; (iii) discretionary accounts shall be identified as such on the new client application form.

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10. Managed Accounts

(a) Managed accounts are accounts for which the broker-dealer or investment adviser pursuant to a contract or arrangement with a client undertakes on behalf of the client, to manage as a portfolio of securities for the purpose of investment.

(b) All broker-dealers and investment advisers who undertake to manage the investments of a client shall set out in writing the terms and conditions under which the account is to be operated or managed including:-

I. the scope of discretion and investment objectives which shall include:-
(i) return objectives for e.g. income, growth; (ii) risk tolerance (stability of values); (iii) liquidity needs; (iv) funds available for investment; (v) time horizons; (vi) tax considerations; (vii) investor preferences, circumstances and unique needs.
II. the tentative asset allocation strategy.
III. the fees to be charged for management and the basis on which they are calculated.

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IV. arrangements for the custody of securities and cash.
V. any arrangements for payment of interest on un-invested balances.
VI. arrangements for reporting and valuations.

(c) The documentation pertaining to the account and the opening of the account must be approved by the head of brokerage or an officer of equivalent seniority in the case of a broker-dealer and the chief of operations or his equivalent in the case of an investment adviser.

(d) No broker-dealer, investment adviser or their representatives shall exercise any discretion on behalf of a client to purchase or sell securities without the client's prior written subscription to and acknowledgement of the terms and conditions referred to above.

11. Client Statements

(a) Every broker-dealer or investment adviser licensed to manage securities shall dispatch to a client a statement of accounts at least once a quarter or as frequently as agreed with the clients whether there

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have been any trades executed by or on behalf of the client in that quarter or not (L.I. 1728 reg. 34).

(b) In the case of a managed account the broker-dealer or investment adviser shall report to the client on the performance and current net value of the portfolio of investments at least once in every quarter or as more frequently specified in the account-opening document.

(c) All such reports and statements shall as far as is feasible be dispatched from a central point preferably by employees of the broker-dealer or investment adviser not involved in handling client accounts.

(d) The giving of client statements to the broker-dealer's representative or investment adviser's representative handling the clients account for delivery to the client shall be avoided.

12. Communications to Clients

No broker-dealer or investment adviser shall without the written authorization of a client:- (i) mail or dispatch communication to the client in care of a third person; (ii) permit anyone other than the client to take delivery of any contract notes, credit or debit notes or any

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other statement pertaining to the operation of the client's securities account.

SECTION E - CUSTODY AND CONTROL OF SECURITIES

(This section should be read in conjunction with the Central Securities Depository Act, 2007, Act 733)

1. Procedures for the Receipt, Custody and

Delivery of Securities

Every broker-dealer and investment adviser shall establish documented procedures for the receipt, custody and delivery of securities that shall be capable of tracing the securities and affixing the responsibility for the securities at all times. The securities shall be under the control and custody of the broker-dealer or the investment adviser or an agent or nominee of the broker-dealer or investment adviser.

2. Register of Securities

(PNDCL 333 s.67, 144)

(a) Every broker-dealer and investment adviser shall maintain separate registers in which shall be recorded the details of:- (i) all securities that are the property of the broker-dealer or investment adviser;

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(ii) all securities that are not the property of the broker-dealer or investment adviser and for which the broker-dealer or investment adviser or any nominee controlled by the broker-dealer or investment adviser is accountable.

(b) In the case of securities which are the property of the broker-dealer or investment adviser the registers shall include the following information: – (i) the name of the holder of the security(ies) or the holder of documents of title to the securities and if the documents are held by a person other than the broker-dealer or investment adviser the nature of such holding for e.g. if the securities are being held as security against loans or advances; (ii) the name of the security(ies), the quantum and price; (iii) the certificate numbers; (iv) contract numbers; (v) the physical location of the securities; (vi) the date of acquisition; (vii) date of disposal; (viii) the name of the broker-dealer through whom the transaction was executed.

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(c) Where there is interest in any other security the following information shall be provided to the Commission:- (i) the name of the security(ies); (ii) the nature of the interest; (iii) the exercise date in the case of a right or option; (iv) the quantity; and the price or pricing formula.

(d) In the case of securities which are not the property of the broker-dealer or the investment adviser but for which the broker-dealer or investment adviser or a nominee of the broker-dealer or investment adviser is responsible or accountable the register shall include the following information: – (i) the name of the holder of the security(ies) or the name of the person for whom the security(ies) or the documents of title to the securities are being held; (ii) the nature of the holding i.e. whether it is for safe custody or deposited with the broker-dealer or a third party as security for loans or advances made by the broker-dealer on behalf of the holder; (iii) the name of the security(ies) and the quantum; (iv) the certificate numbers;

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(v) the physical location of the securities.

(e) The delivery or receipt of all securities by the broker-dealer or investment adviser must be evidenced by prior, serially numbered acknowledgments clearly indicating:- (i) the name of the person who is the registered holder of the security(ies); (ii) the person to whom the security(ies) is delivered or received from; (iii) the name of the security(ies) and the quantum; (iv) the certificate numbers.

3. Notification of Particulars of Register of Interest in

Securities (PNDCL 333 s.68 & L.I. 1728 reg. 20)

Broker-dealers and their representatives are required to notify the Commission in Form SEC D(i) of Schedule 3 of L.I. 1728 of the particulars of the register which shall include the place at which the register is kept at the time of the application for a licence within 14 days of receipt of a licence. Where a person ceases to be a licensed market operator notification shall be sent to the Commission in Form SEC D (ii). Any person who fails to notify the

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Commission as required by the above provision commits an offence and is liable on conviction to payment of a fine of 25 penalty units.

4. Control over the Movement of Securities

(a) The movements of securities in the control or custody of the broker-dealer or investment adviser shall be subject to controls in transit that ensure that physical and accounting control of the securities is maintained.

(b) The transit of securities shall be recorded in and evidenced by appropriate entries in a delivery book or a mail register maintained for the purpose with suitable acknowledgements being recorded of receipt and delivery.

(c) Every broker-dealer and investment adviser shall indicate suitable identification (i.e. corporate ID, national ID, passport or driver's licence) criteria to be used by employees in the case of handing over custody of securities to clients, agents or third parties.

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5. Custody and Storage of Securities

(a) The custody of securities owned by clients of a broker-dealer or investment adviser shall be entrusted to a designated employee or employees of a broker-dealer or investment adviser who shall be independent from the person responsible for balancing stock records and separate from the representative who advises or handles the client.

(b) The physical handling of securities shall be limited to the fewest number of individuals.

(c) Safe storage of securities shall be ensured with access to the storage facility being limited and every access documented.

(d) Where the client elects to use a custodian for holding of its securities, such securities will be deposited with the custodian unless otherwise directed by the client.

6. Securities Inventory

(a) Every broker-dealer and investment adviser shall ensure that securities in their custody and control are counted regularly to facilitate the maintenance of accurate records.

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(b) The frequency and intensity of the count shall depend on the internal control procedures employed by each broker-dealer or investment adviser with a count being conducted quarterly and in conjunction with the annual audit.

(c) Differences detected in the course of a count shall be investigated and corrected within 3 working days.

7. Provisions Relating to Securities Documents in the

Custody of a Broker-Dealer (PNDCL 333 s. 84)

(a) Every broker-dealer shall ensure that all securities or documents of title to securities received from a client or for which the broker-dealer or nominee is accountable for, are registered in the name of the client by the body corporate issuing the security unless the client requests that:- (i) the documents be registered in the name of a nominee controlled by the broker-dealer; (ii) the documents are deposited in safe custody with the bankers of the broker-dealer.

(b) A broker-dealer shall not use the securities or documents deposited with the broker-dealer or a nominee controlled by the broker-dealer for safe custody, for any purpose not authorized by the clients or the law.

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(c) A broker-dealer may however deposit such securities or documents of title to securities as security for a loan or advance made to the broker-dealer if the client owes the broker-dealer an amount of money as a result of a transaction entered into by the broker-dealer on behalf of the client and provided that such loan does not exceed the amount owed by the client to the broker-dealer.

(d) Prior to doing so the broker-dealer shall give written notice to the client stating his intentions and identifying the securities which are to be so utilized and shall continue to notify the client of the deposit at six month intervals during the continuation of the arrangement.

(e) The broker-dealer shall ensure that the documents are delivered to the client within one week of receiving the sum owed to him by the client on account of the said deposit.

8. Dividends and Interests

(a) Every broker-dealer and investment adviser shall maintain records pertaining to the receipt of dividends, interest and other corporate rights and benefits such as rights and bonuses accruing to the securities of clients that are deposited with the

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broker-dealer or investment adviser or a nominee of the broker-dealer, or investment adviser.

(b) These records shall be kept separate from the records maintained by the broker-dealer or investment adviser with respect to securities that form the portfolio of the broker-dealer or investment adviser.

(c) All dividends and interest payments and notices of corporate actions and benefits received shall be remitted or communicated to the client as immediately as possible after receipt or banked in the clients account maintained by the broker-dealer or investment adviser.

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PART III

TRADING AND CLEARING

AND SETTLEMENT

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PART III - TRADING, CLEARING AND SETTLEMENT

SECTION F - TRADING

Trading shall be performed strictly in accordance with the trading rules approved by the SEC.

SECTION G - CLEARING AND SETTLEMENT OF SECURITIES

1. Clearing House Rules

Clearing and settlement of securities shall be performed strictly in compliance with rules of the Clearing-house of the stock exchange.

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PART IV

DEALINGS AS PRINCIPAL,

STAFF TRADES AND

PROHIBITED TRADING PRACTICES

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PART IV - DEALINGS AS PRINCIPAL, STAFF TRADES AND

PROHIBITED TRADING PRACTICES

(The provisions of this Part are applicable to all Broker-Dealers and Investment Advisers licensed to manage securities)

SECTION H - DEALINGS BY THE BROKER-DEALER OR

INVESTMENT ADVISER AS PRINCIPAL

1. Prohibitions and Notifications

A broker-dealer is prohibited from dealing as principal in any securities with a person (who is not a broker-dealer) without informing the person prior to the transaction that the broker-dealer is dealing as principal and not as agent (PNDCL 333 s. 77).

(a) A broker-dealer dealing or entering into a transaction as principal shall include a situation where the broker-dealer:- (i) enters into a transaction on behalf of a person associated with him; (ii) deals in securities on behalf of a body corporate in which the broker-dealer has a controlling interest; (iii) deals in a security on behalf of a body corporate in which the interest of the broker-

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dealer when taken together with the interests of the directors of the broker-dealer in such body corporate amounts to a controlling interest.

2. Priority

A broker-dealer or investment adviser is required to give priority to client orders over orders of the broker-dealer or investment adviser acting as principal or on behalf of a person associated with the broker-dealer or investment adviser (PNDCL 333 s.79).

3. Separations and Chinese Walls

(a) A broker-dealer or investment adviser shall ensure that it has “Chinese walls” procedures in place to ensure that:- (i) a specific person(s), unit or department is responsible for making investment decisions on behalf of the broker-dealer or investment adviser; (ii) these investment decisions and the rationalization for these decisions are documented and approved by a senior manager;

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(iii) the operations of that person(s), unit or department are kept separate and independent of the other client operations of the broker-dealer or investment adviser; (iv) the orders on behalf of the broker-dealer or investment adviser are executed in such a manner so as to avoid any occurrence of price manipulation, insider trading and front running; (v) all exceptions noted are promptly investigated.

SECTION I - STAFF TRADES

1. Trading to be done through Employing Broker-Dealer

Every broker-dealer shall ensure that all its directors, employees and agents collectively referred to as “staff” for the purpose of this section of this Manual trade through it and not through any other broker-dealer.

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2. Prior Authorization

All staff trades shall only be transacted with the prior authorization of the chief executive officer or the compliance officer of the broker-dealer.

3. Restricted List

(a) The compliance officer shall maintain a “restricted securities” list in which staff shall not be permitted to trade.
(b) The “restricted securities” list will comprise all securities in which the broker-dealer possesses material non-public information.
(c) Securities may be added or deleted from the restricted list at the discretion of the management of the broker-dealer.

4. Dealings by Employees of an Investment Adviser

All transactions in securities by directors, employees and agents of the investment adviser collectively referred to as “staff” for the purpose of this section of the Manual shall be with the prior authorization of the chief executive officer or the compliance officer of the investment adviser.

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5. Restrictions on Staff Trades

Staff trades shall be subject to the following restrictions:- (i) They shall be at a fixed price; (ii) All client trades shall be given priority; (iii) An identified broker-dealer's representative shall be responsible for the handling of such trades.

SECTION J - PROHIBITED TRADING PRACTICES

1. Fraud in Connection with the Purchase or Sale

of Securities (PNDCL 333 Part X)

(a) No broker-dealer or investment adviser or employee or agent of a broker-dealer or investment adviser shall either directly or indirectly in connection with the purchase or sale of any security:- (i) employ any device or artifice with a view to defrauding any person; (ii) engage in any fraudulent act or deceitful practice or business conduct; (iii) make any false or misleading statements in relation to a material fact or omit material facts necessary to correct statements already made, which were previously found to be false or misleading.

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(b) No broker-dealer or investment adviser or an employee or agent of a broker-dealer or investment adviser shall effect any transaction by means of any manipulative, deceptive or other fraudulent device or contrivance in order to induce or attempt to induce the purchase or sale of any securities.

2. Acts Committed to Create a False or Misleading

Market in Securities

(a) No broker-dealer or investment adviser or employee or agent of a broker-dealer or investment adviser shall create, cause to be created or do anything that is calculated to create a false or misleading appearance or impression of active trading or a false or misleading appearance or impression with respect to the market for or the price of any securities. (b) No broker-dealer or investment adviser or employee or agent of a broker-dealer or investment adviser shall purchase or cause to be purchased any security at successively higher prices or cause to be sold any such security at successively lower prices for the purpose of unduly or improperly influencing the market price for such security or for the purpose of establishing a price which does not reflect the true state of the market for that security.

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3. Sales Involving no Change in Beneficial Ownership

(a) No broker-dealer or investment adviser or an employee or agent of a broker-dealer or investment adviser shall by means of a purchase or sale of any securities that does not involve a change in the beneficial ownership of those securities create a false market in the said securities. (b) No broker-dealer or investment adviser or an employee or agent of a broker-dealer shall for the purpose of creating a false or misleading appearance of activity in the trading of a security or for the purpose of creating or inducing a false or misleading appearance with respect to the market for such a security to:- (i) execute any transaction in such security which involves no change in the beneficial ownership thereof; (ii) enter any order or orders for the purchase of such security with the knowledge that an order or orders of substantially the same size at substantially the same price for the sale of such security has been or will be entered by the same parties or their nominees;

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(iii) enter any orders or orders for the sale of any security with the knowledge that an order or orders of substantially the same price for the purchase of such security has been or will be entered by or for the same parties or their nominees.

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PART V

ACCOUNTING RECORDS,

FINANCIAL MANAGEMENT AND

REPORTING AND AUDIT

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PART V - ACCOUNTING RECORDS, FINANCIAL

MANAGEMENT, REPORTING AND AUDIT

SECTION K - FINANCIAL OPERATIONS

1. Bank Accounts

(a) The operations of all bank accounts shall conform to generally accepted banking and accounting practices and procedures.

(b) All bank accounts shall be under the administration of a designated officer of the broker-dealer or investment adviser.

(c) The opening of all bank accounts shall be approved by the board of directors of the broker-dealer or investment adviser.

(d) Access to bank accounts and banking information shall be limited to specified authorized personnel only.

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2. Segregation of Client Funds (PNDCL 333 ss. 80, 85

and 86)

(a) Every broker-dealer and investment adviser shall establish and maintain in a bank or banks in Ghana, one or more accounts separate from the broker-dealer's and investment adviser's own operating accounts into which shall be paid less any commissions and agreed expenses:- (i) all amounts that are received from any client in relation to the purchase of any securities for which securities have not as yet been delivered to the client; (ii) all amounts that are received for the account of any client from the sale of securities that has not been paid to the client or as the client directs.

(b) All amounts received as referred to above shall be held in trust by the broker-dealer or investment adviser and retained in such account(s) which shall be termed Trust account(s) until :- (i) paid to a person entitled to the money or in accordance with the written direction of a person entitled to the money; (ii) used for defraying brokerage and other proper charges;

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(iii) used for making a payment that is otherwise authorised by law.

(c) Any money received from a client other than money received to defray brokerage and/or other charges such as management fees must be banked not later than the next day on which the bank is open for business after the receipt of the money.

(d) The broker-dealer or investment adviser is prohibited from using the funds received and must retain the money in the bank account referred to above until the client has been provided with the documentation which must evidence such receipt and acknowledges in writing that he has received the document referred to in Section 3 of Part II of this Manual.

3. Custody and Handling of Funds

(a) The employees of the broker-dealer or investment adviser responsible for receiving funds from the client and dispatching funds to the client shall be separate from the broker-dealer's representative or investment adviser's representative handling the client's securities account.

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(b) Clients shall be discouraged from sending funds through broker-dealer's representatives or Investment adviser's representatives who take and accept their orders.

(c) All deposits shall be verified for proof of deposit from the bank by a responsible official to ensure that funds are deposited intact and discrepancies investigated and resolved promptly.

(d) Cash and cheques not deposited shall be kept in a fire proof safe custody overnight.

4. The Issuance of Cheques

(a) Every broker-dealer or investment adviser shall establish formal documented procedures to identify the levels of authorisation needed for requisitioning the issue of a cheque.

(b) A log must be maintained indicating the location to which blank