1. A Licensee must have in place an effective and robust system to protect and manage the Float to ensure that: (a) all funds are deployed for the prescribed usage only; (b) funds belonging to Customers are protected against claims by other creditors of the Licensee in all circumstances; and (c) funds are protected from operational and other relevant risks.
    
2. A Licensee may need to seek an external legal opinion on the protection arrangement of the Float to ensure the legal soundness of the arrangements and to commission an independent review to ensure the operational soundness.
    
3. Licensed banks are required to comply with the requirements set out in paragraphs 7 to 16 in this Article, and are exempt from the other paragraphs.

Protection of the Float

4. A Licensee must put in place an effective contractual arrangement to ensure the legal right and priority claim of the Float by Customers in the event of insolvency of a Licensee. With respect to the contractual arrangement, a Licensee should ensure that the assets of the Float must be adequately protected from any possible claims and in segregated accounts with licensed banks or a foreign bank recognized by the Central Bank.
    
5. Alternatively, an effective bank guarantee and/or insurance coverage may be used. For the avoidance of doubt, any funds received by the Licensee that are not yet credited to the Customers’ accounts, or funds that are still held by the Licensee but have already been deducted from the Customer’ account are treated as the Float received from the Customer and must be accorded the same level of protection.
    
6. Where circumstances warrant a trigger to redeem the Float to Customers, the contractual arrangement should operate to the effect that proper legal positions and authorizations are in place to ensure a smooth and efficient redemption process. Detailed procedures to ensure a smooth and efficient redemption process must be put in place. In assessing the efficiency of the redemption process, the Central Bank will consider factors including but not limited to notification to relevant Customers, the duration in which a Customer is expected to receive the redemption, and the steps that a Customer needs to take to seek redemption.
    
7. A Licensee must ensure that there are sufficient funds for the redemption of the Float to all Customers at all times and there are sufficient additional funds to pay for the costs of distributing the Float to all Customers in case of need.
    
8. An adequate process must be put in place to ensure timely and accurate records of funds paid into and out of a Licensee’s Float, with appropriately regular reconciliation between system records and the actual Float (e.g. balances of the dedicated bank account holding the Float). Such reconciliation should be done at least on a daily basis.
    
9. A Licensee must ensure that all Customer accounts in the SVF scheme Customer ledger are maintained in an accurate and timely manner and that the aggregate balance of all Customer accounts in the ledger accurately reflects the total amount of the Float of the SVF scheme at all times.
    
10. The assets, including cash and bank deposits, in which the Float of an SVF scheme are held must be segregated from the Licensee’s own funds as well as funds received for the Licensee’s other business activities.
     
11. A Licensee must put in place effective internal control measures and procedures, which constitute an integral part of the Licensee’s overall robust internal control system, to protect the Float from all operational risks, including the risk of theft, fraud and misappropriation.

Management of the Float

12. The Float of an SVF scheme must be managed mainly for the purpose of liquidity management to ensure that there will always be sufficient funds for redemption. A Licensee must put in place effective liquidity management policies, guidelines and control measures commensurate with the mode of operation of the SVF scheme in respect of the assets in which the Float are held.
     
13. A Licensee must not adopt a business model that takes investment returns from the Float management as a significant source of income. A Licensee who proposes to hold a proportion of the Float in low risk financial assets other than cash or bank deposits must obtain the Central Bank’s prior written consent by demonstrating to the Central Bank that the Float will be adequately protected from all relevant risks, including investment risk, market risk, concentration risk and liquidity risk. The Licensee seeking the Central Bank’s prior consent must put in place adequate investment policies and guidelines and effective control measures to protect the Float from all relevant risks.
     
14. Unless effective currency risk management policies, guidelines and control measures are put in place, mismatch between the currency denomination of the Float and that of the assets in which the Float are held is not allowed except for the mismatch between AED and US dollar positions.
     
15. If there are legitimate reasons that render it inevitable for a Licensee to run a currency mismatch as described in paragraph 14 above, the licensee must obtain an exemption from the Central Bank. Licensees exempted from this provision, will be expected to put in place appropriate policies and procedures to monitor or manage the foreign exchange risk arising therefrom and to ensure the sufficiency of the Float.

Reporting to the Central Bank

16. In respect of the protection and management of the Float, any material non-compliance with any regulatory requirements or internal policies, procedures and controls as well as any material unresolved discrepancies identified in any reconciliation must be reported to the Central Bank together with adequate rectification measures immediately through the established communication channels.