Financial Services Act 1986

55 Clients' money

(1) The Secretary of State may make regulations with respect to money (in this section referred to as " clients' money ") which authorised persons, or authorised persons of any description, hold in such circumstances as are specified in the regulations.

(2) Without prejudice to the generality of subsection (1) above, regulations under this section may—

(a) provide that clients' money held by an authorised person is held on trust;

(b) require clients' money to be paid into an account the title of which contains the word " client" and which is with an institution of a kind specified in the regulations or, in the case of a member of a recognised self-regulating organisation or a person certified by a recognised professional body, by the rules of that organisation or body;

(c) make provision with respect to the opening and keeping of clients' accounts, including provision as to the circumstances in which money other than clients' money may be paid into such accounts and the circumstances in which and the persons to whom money held in such accounts may be paid out;

(d) require the keeping of accounts and records in respect of clients' money;

(e) require any such accounts to be examined by an accountant having such qualifications as are specified in the regulations and require the accountant to report to the Secretary of State, or in the case of a member of a recognised self-regulating organisation or a person certified by a recognised professional body, to that organisation or body, whether in his opinion the provisions of the regulations have been complied with and on such other matters as may be specified in the regulations ;

(f) authorise the retention, to such extent and in such cases as may be specified in regulations, of so much of clients' money as represents interest.

(3) Where an authorised person is required to have an auditor, whether by virtue of any provision contained in or made under any enactment (including this Act) or of the rules of any such organisation or body as is mentioned in paragraph (b) of subsection (2) above, the regulations may require the examination and report referred to in paragraph (e) of that subsection to be carried out and made by that auditor.

(4) An institution with which an account is kept in pursuance of regulations made under this section does not incur any liability as constructive trustee where money is wrongfully paid from the account unless the institution permits the payment with knowledge that it is wrongful or having deliberately failed to make enquiries in circumstances in which a reasonable and honest person would have done so.

(5) In the application of this section to Scotland for the reference to money being held on trust there shall be substituted a reference to its being held as agent for the person who is entitled to call for it to be paid over to him or to be paid on his direction or to have it otherwise credited to him.