Account Segregation: Meeting Global Standards for Asset Safety

Written by

Rupert Booth

Published on

Insights

MYRIAD Group Technologies Ltd - Revolutionise your Third‑Party ManagementSince the publication of AFME’s key Asset Segregation Principles in 2016, scrutiny upon the disciplined safekeeping of securities has broadened and deepened. With new asset classes, crypto in particular, emerging onto the scene, accompanied by additional custody chains of varying complexity, rules around asset safety are being tightened in many major jurisdictions, such as the EU, and also at national levels. As the world plunges in and out of turmoil, the identification of asset ownership and security becomes of particular concern for investors and custodians alike.

To what extent are the tenets of secure safekeeping scrupulously observed? Fines are still being levied upon banks for failure to adequately protect their customers’ securities. Clearly internal accounts should be fully segregated and identify the immediate client for whom the assets are being held. Equally, external accounts should be segregated between proprietary assets and securities account holder assets. In the event of the insolvency of a securities account provider, client asset protection is of the utmost importance, and these practices ensure the desired protection is afforded.

Continued tightening and clarification of rules around asset safety require asset owners and managers and their custody service providers to review and strengthen operational frameworks. Although service providers can be expected to provide supporting processes and information, the responsibility often starts with the asset owners and managers to comply with the rules. Easier said than done if the tools are not there to reflect the true status quo of the accounts held with each custodian.

Technology is helping service providers to improve transparency, increase efficiency and develop more value-added services, and the same should be the case for those asset owners and managers. Network management platforms must be able to impose this transparency upon the custodial network down to account level – the integrity of the bank depends upon this level of granular detail. If this data is in evidence and presented as reportable intelligence then the institution may provide its clients with assurance, simply, clearly and quickly, that their assets are demonstrably segregated and secure.

The support that MYRIAD lends its users in this regard is as dependable as it is innovative. A true reflection of every account held at every custodian worldwide means reliable data instantly delivered upon demand, managers given a clear picture of the extent of exposure and risk for any client and of assets demarcated accordingly. Peace of mind for the Network and Risk Manager but more importantly, security for the client.