Malaysia--Placement of Clients' Monies in Repo Transactions

Placement of Clients' Monies in Repo Transactions




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Circular No 125/2015
Dated 17 June 2015
To Members of the Malaysian Bar
Placement of Clients' Monies in Repo Transactions
Bar Council has recently noted, from Accountant's Reports submitted to us, that some law firms have placed clients' monies in Repo transactions.

Bar Council sought clarification from The Association of Banks in Malaysia ("ABM") regarding the present practices of banks in respect of placement of clients' monies in Repo transactions, and its effect in the event of premature withdrawals.
ABM has confirmed that there is a penalty for premature withdrawals, in terms of a deduction of the break funding cost, which acts as a deterrent for premature termination of a Repo transaction.  The quantum of the penalty is not known in advance, as it will be calculated based on the difference between the initial funding rate and the rate at the time of the premature withdrawal.

In this regard, Members of the Bar are prohibited from placing clients' monies in Repo transactions unless specific instructions are received from clients to do so, and provided always that Members discharge their professional duty by explaining to clients the possibility that capital placed in such transactions may be reduced as a result of the break funding cost arising from a premature withdrawal of clients' monies from Repo accounts.

All previous Bar Council directives to the contrary, in respect of placement of clients' monies in Repo transactions or accounts, are hereby revoked with immediate effect.
Members are advised to be guided accordingly.
Should you have any enquiries, please contact Marianna Laureen Tan, Executive Officer, by telephone at 03-2050 2086, or by email at ml.tan@malaysianbar.org.my.
Thank you.
Karen Cheah Yee Lynn
Secretary
Malaysian Bar
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