PART B.3 - WRITTEN CUSTODIAL AGREEMENT REQUIREMENT

4353. Agreement with each external securities location

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    1. As required in Form 1, a Dealer Member must execute a written custodial agreement with each external custodian. In order for the external custodian to qualify as an external acceptable securities location the written custodial agreement must state that:

      1. the Dealer Member must give prior written consent to any use or disposal of the securities,

      2. security certificates can be delivered promptly on demand or, if certificates are not available and the securities are bookbased, must be transferable either from the location or to another person at the location promptly on demand,

      3. the securities are held in segregation for the Dealer Member or its clients free and clear of any charge, lien, claim or encumbrance in favour of the custodian, and

      4. the custodian indemnifies the Dealer Member against losses due to the custodian’s failure to return any securities or property it holds to the Dealer Member. However, the custodian’s liability is limited to the market value of the securities and property at the time it was required to deliver them to the Dealer Member.

        When custody is secured by a global custodial agreement, including where the custodian uses a subcustodian, the custodian’s indemnity must:

        1. meet standard industry practice,

        2. be legally enforceable, and

        3. be of sufficient scope and in a form that is acceptable to IIROC.

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