CHAPTER 5

FINANCIAL AND ACCOUNTING REQUIREMENTS
 

Obligation to comply with financial and accounting requirements
 

5.01 Every member shall at all times strictly comply with and adhere to the Act, regulations made under the Act and these rules with regard to financial and accounting requirements.


Increase in net capital and liquidity margin requirements


5.02 Notwithstanding any minimum net capital requirement prescribed by the Council, the Board may increase the minimum net capital and liquidity margin requirements in respect of any member to suit the


circumstances of a particular case if the Board deems that the circumstances so justify.


Memberís duty to notify inability to comply


5.03 (1) A member shall notify GASCI and the Council immediately if it becomes aware of any inability by it to comply with the net capital and liquidity margin requirements.


(2) In addition to giving notice under paragraph (1), the member shall cease dealing in securities otherwise than for the purpose of giving effect to any agreement or arrangement entered into before the time when it became so aware.


(3) A member shall be deemed to have been aware of such inability under paragraph (1) if it would, with the exercise of reasonable diligence, have been aware of such inability.


Power of Board to take action


5.04 Where the Board becomes aware of any inability by a member to comply with the net capital or liquidity margin requirements, it may, whether or not notice has been given under rule 5.03(1) take any action as it thinks fit, including but not limited to an order for the member to cease trading immediately. In the event the Board has taken any action against a member or ordered a member to cease trading the Board will provide an opportunity for the member to be heard in accordance with the GASCI disciplinary procedures. The Boardís action or cease trading order shall remain in effect until the hearing is completed.


Duty to keep accounting records


5.05 (1) A member shall keep accounting records which conform to International Accounting Standards or are deemed to be appropriate by the Council to show and explain its securities transactions (whether effected on its own behalf or on behalf of others) and which shall Ė


(a) disclose with reasonable accuracy the financial position of the member at that time;

(b) enable the member to prepare a balance sheet and profit and loss account as at any time and which comply with the requirements of these rules.


(2) Without prejudice to the generality of paragraph (1), accounting records shall, in particular, contain -


(a) entries from day to day of all sums of money received and expended by the member, and the matters in respect of which the receipt and expenditure takes place;

(b) a record of all assets and liabilities of the member including any commitments or contingent liabilities;

(c) entries from day to day of all purchases and sales of securities made by the member distinguishing those which are made by the member on his own account and those which are made by the member on behalf of others;

(d) entries from day to day of the receipt and dispatch of documents of title, or documents evidencing title, to securities which are in the possession or control of the member.

(e) entries from day to day of -

(i) all money which is paid into or out of a customer bank account maintained for the purpose of rule 5.10

(ii) receipts and payments of customer money not passed through a customer bank account, identifying the persons to or from whom such receipts and payments are made;

(f) a record of -

(i) aggregate balances on customer bank accounts;

(ii) individual customerís balances stating the name of each customer and the amount held or received for that customer;

(g) sufficient information to explain the member dealings with each customer bank account;

(h) details of all securities -

(i) which are the property of the member; and

(ii) which are not the property of the member but for which the member is accountable showing for whom they are held;

(i) any other particulars from time to time required by GASCI or the Council to be reflected in the accounts or records of the member.


Records to be kept up to date


5.06 (1) The obligations of members under these rules are continuing obligations and continuous performance of them is required to ensure that accounts and records are updated daily.


(2) If such accounts and records are not kept sufficiently up to date, as required by these rules, GASCI may require the member at his own expense to appoint a professional accountant, approved by GASCI, immediately to take such action as is necessary to bring the accounts and records sufficiently up to date.


Audit trail


5.07 (1) Information required by these rules to be recorded shall be recorded in such a way as to enable a particular transaction to be identified at any time and traced through from initiation of the order to final settlement.


(2) All records shall be filed, indexed and cross referenced so as to permit prompt access to any particular record.


(3) A member shall request proof of a customerís identity before dealing on their behalf and shall record details of the identification used eg National ID card number or passport number.


Retention of records


5.08 A member shall retain all books of account and other records required to be kept under these rules for a period of not less than 7 years from the date on which they are made, together with every contract note received by the member and a copy of every contract note issued by the member.


Customer money


5.09 (1) For the purpose of these rules customer money is money of any currency which, in the course of carrying on securities business, a member holds or receives on behalf of a customer or which it owes to a customer.


(2) Customer money shall be held by the member on trust for and on


behalf of the respective customers for whom that customer money is received or held according to their respective shares in it.

(3) Customer money shall not form part of the assets of the member for any purpose and, except as legally allowed, shall not be available in any circumstances for payment of any debt of the member.


Customer bank accounts


5.10 (1) A member who receives or holds customer money shall open one or more customer bank accounts with a bank licensed under the Financial Institution Act 1995 and which is approved by the Council for the purpose of these rules.


(2) A customer bank account shall be kept segregated from any account holding money belonging to the member.


(3) A member shall forthwith pay into a customer bank account all customer money coming into its hands for or on behalf of a customer.


(4) A member shall keep records of -

(a) all amounts paid into a customer bank account kept by the member, specifying the persons on whose behalf the amounts are held and the dates on which they were paid into the account;

(b) all withdrawals from the customer bank account, the dates of those withdrawals, and the names of the persons on whose behalf the withdrawals are made; and

(c) such other particulars (if any) as may be prescribed by the Board.


Members to keep separate accounts for every customer


5.11 A member shall keep separate accounts for every customer in respect of its business of dealing in securities.


Annual financial statements


5.12 (1) A member shall prepare for each of its financial years annual financial statements which shall consist of-


(a) a balance sheet as at the last day of the financial year; and

(b) a profit and loss account for the financial year.


(2) The balance sheet shall give a true and fair view of the state of affairs of the member as at the end of the financial year.


(3) The profit and loss account shall give a true and fair view of the profit or loss of the member for the financial year.


(4) A member shall submit its externally and independently audited annual financial statements to GASCI within 4 months after the end of the financial year to which they relate together with its auditors report.


(5) The accounts submitted in accordance with subsection (4) shall be signed by a director with a statement from the director as to the propriety, disclosure and accuracy of the statements.


Availability of accounts for inspection


5.13 Every member shall make all books of account and other records required to be kept under the Act available to GASCI and the Council for inspection, or audit by any auditor appointed by GASCI or the Council, when required by GASCI or Council to do so.

Quarterly Reporting Statements


5.14 (1) Every member shall within 30 calendar days of the end of each quarter of its financial year, unless such time period is extended in writing by GASCI, submit to GASCI a Quarterly Reporting Statement in the form prescribed by GASCI: provided that if requested by the Board, a member shall submit a Quarterly Reporting Statement to GASCI within such shorter period as the Board may stipulate (not being less than 14 days) after the end of the quarter.


(2) When submitting the Quarterly Reporting Statement under paragraph (1) the member shall also provide a declaration, signed by a director, in the form prescribed by GASCI, stating, inter alia, that it has at all times during the relevant period complied with the financial requirements referred to in rules 5.01 and 5.02, together with a signed declaration in the prescribed form by the accounting or other officer responsible for the preparation of the Quarterly Reporting Statement.


(3) The Quarterly Reporting Statement shall be signed by the principal of the member with a statement from the principal as to the propriety, disclosure and accuracy of the Quarterly Reporting Statement.


Submission of annual accounts


5.15 A member shall, in respect of the financial year beginning before and ending after the day on which the member commences its business of dealing in securities, and in respect of each subsequent financial year, submit an audited profit and loss account and a balance sheet made up to the last day of the financial year to the Board not later than 3 months after the end of the financial year together with a signed auditorís report thereon which report shall comply with the requirements of regulation 18 of Regulation No. 6 of 2002 of the Securities Industry Act (Accounting and Financial Statements) Regulations 2002).


GASCIís right to demand documents


5.16 Every member shall within 14 days, or such other period as GASCI may specify, of the receipt of a written demand from GASCI, submit to it such statements, books, records, accounts and other documents as GASCI may demand. GASCI may at the request of the Council make such documents available to the Council for inspection. Where GASCI exercises this discretion, the authority is deemed to have been given by the member concerned.


Power of GASCI to make spot checks


5.17 (1) Officers or employees of GASCI or persons appointed by GASCI may from time to time inspect the books maintained by the member relating to its business and financial position. Every member shall provide or allow such officers or employees or appointed persons access to its premises, accounts, books, documents, papers and records necessary for the discharging of its duty, with or without prior notice.


(2) Any expenses incidental to or consequential upon an inspection ordered under paragraph (1) by GASCI shall be borne by the member concerned, unless GASCI otherwise determines.


(3) A member shall not be entitled to claim against GASCI, officers or employees of GASCI or any appointed person for any loss or damages whatsoever relating to an inspection ordered under this rule.


Power of person authorised by GASCI


5.18 (1) Any person appointed under rule 5.17 shall be deemed to have been authorised by the member concerned to obtain direct from such memberís auditor reporting on the accounts any information or explanation which it may consider necessary for the purpose of carrying out his duties.


(2) In any case where the information obtained under paragraph (1) or any other matter arising out of his enquiries leads the person appointed under rule 5.17 to consider that further information should be obtained by GASCI regarding the memberís state of affairs, it shall be deemed to be authorised to report accordingly to GASCI.


(3) All accounts and other information obtained by the person appointed under rule 5.17 shall be retained by GASCI and shall be regarded as confidential, and disclosure of information contained or derived there from shall not be made to any body or persons except that GASCI may at the request of the Council furnish a copy of its report to the Council and the authority for doing so is deemed to have been given by the member concerned. The member shall have the right to obtain a copy of such report.