Funding and treasury management

SCM DMA (Pty) Ltd (“DMA”) uses Citibank as our global correspondent bank. Citibank is a US-listed global banking group with a Tier 1 banking status.. DMA is further required to house a collateral line with Saxo Bank, a Danish regulated Bank authorised by seven Tier-1 regulators, including the FCA and FINMA, and possessing a strong financial foundation supported by a long-term issuer credit rating to 'A-' with S&P and a credit ratio of 28%.

It’s important to note that all client funds deposited with DMA are held off-balance sheet. A full register of deposits, withdrawals and movements for transactions is recorded in a register along with the beneficial owner of the assets. In accordance with regulated client asset segregation legislation, funds are held in trust separately from DMA’s own assets and cannot be used or commingled with the assets of DMA.

“Despite anything to the contrary in any law or the common law, trust property invested, kept in safe custody, controlled or administered by a financial institution or a nominee company under no circumstances forms part of the assets or funds of the financial institution or nominee company”.

Transactions are settled according to settlement cycles as per exchange regulations. DMA is required to post a collateral line with its executing venue. No execution venue can comingle client assets with its own assets. Both Citibank and Saxo Bank run a transparent and defined risk management framework, including solvency testing. Due skill and care are taken to ensure the stability of the group and the safety of client assets. Capital and Liquidity management policies are responsible for the Internal Capital Adequacy Assessment Process (ICAAP).

Key Features of DMA’s Client Funds Risk Management:

•  Segregation: DMA must hold client assets separate from DMA’s own assets and maintain accounting segregation between DMA’s own assets and clients’ assets.
• Designation and Registration: DMA must ensure that client assets are clearly identified in its internal records and are separately identifiable from DMA’s own assets.
• Reconciliation & Calculation: DMA must keep accurate books and records as are necessary to enable it, at any time and without any delay, to provide an accurate and independent record of the client assets held for each client and the total held in the Client Asset Account. Each business day, DMA must ensure that the aggregate balance of client asset accounts as at the close of business on the previous working day is equal to the amount it should be holding on behalf of its clients.
• Client Disclosure and Client Consent: DMA must provide information to its clients regarding how and where their client assets are held and the resulting risks thereof. Changes must be communicated and Clients must acknowledge and accept the DMA General Business Terms.
• Risk Management: DMA must ensure it has and applies systems and controls that are appropriate to identify risks in relation to client assets and should put in place mitigations to counteract these risks. In addition, DMA has a client treasury management plan where swept client funds are held for safe keeping at an authorised credit institution, bank or in qualifying money market funds. In each case, your cash is held on a pooled, omnibus basis.
• Client Asset Examination: DMA must engage the services of its external auditor to report, at least annually, on DMA’s safeguarding of client assets.

Custody of script

All script is held with Citi Group in the name of Saxo Bank and separated in the name of DMA as White Label Client. A full sub-register is maintained by DMA for the  account holder, as owner of the assets, and these assets are reported live via the available platforms.

Beneficial owner declarations are further required for the US market (forms W8), as well as for FATCA and CRS, and DMA complies with it’s AML obligations at account-opening, and on an ongoing basis, to ensure the correct identity of clients.

All positions are settled daily and reconciled against Citi, as the primary custodian. All clients must pre-fund their transactions. The global custodian reconciliation is matched to all prime broking and institutional brokers. End-of-day files are then delivered with settled and unsettled transactions. The live trading platforms provide access to position management, statements and audit trails.

As per section 72(2) (3) of the Danish Financial Business Act, Saxo Bank is obliged to ensure the title of customer assets. The provision has the purpose of protecting the title of customers financial instruments kept in custody in the event of insolvency of Saxo Bank.

Section 72(2)(3) follows from Section 72(3) that the Bank may keep the financial instruments of its customers in omnibus accounts, provided that the customers are informed and given consent. A register must be maintained to record the contents of each customer's portfolio. As such it must be possible at all times to identify the rights of each customer in relation to specific financial instruments in order to retain the rights under Section 72.

Given that all WLC assets will be clearly defined in a segregated sub-account, there can be no doubt as to the ownership of the assets, and the WLC is entitled to withdraw its financial assets from Saxo Bank in case of the bank's insolvency. Section 72(6) further states that the WLC may rely on the registration of the bank to claim individual segregated rights over financial instruments.

As per the live reporting and position keeping, the structure mitigates the risk of delays in taking control of the financial assets in terms of Section 82 of the Bankruptcy Act as there can be no dispute as to the registration of the financial instruments.

DMA further utilises SIX Group for the provision of custodial services of securities and funds across a wide range of international markets. As the national Central Securities Depository (CSD) of Switzerland, SIX SIS AG offers comprehensive custody and settlement services for national and international securities in Switzerland.

The settlement cycle is the same as with CITI Group custody and assets are held in SCMSA Nominees on behalf of the beneficial owner.

Where applicable or required by a regulatory body, DMA reports transactions and beneficial holdings to approved registers for the recording of client holdings.

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