Standing authority over client securities

The word standing signals that the authority continues beyond one identified transaction. It may permit specified handling of client securities or securities collateral, such as depositing assets with an eligible institution or applying collateral under an agreement. The Client Securities Rules regulate that permission because it affects how client assets may be held or used over time.

What makes it a standing authority

Look at the scope and duration, not only the title on a form. A client who gives a broker one direction to sell a named holding gives a transaction-specific instruction. A permission that lets the firm repeatedly deposit, lend, pledge, or otherwise deal with assets is continuing authority. A firm cannot turn a standing authority into a one-off instruction merely by describing it that way in its paperwork.

Formal safeguards

A standing authority must be in writing and comply with the applicable requirements for the client, the authority's permitted purpose, and its term and renewal. The client needs clear information about what the permission allows. The intermediary must maintain controls to track the authority, monitor expiry and renewal, and ensure each use falls within its terms. Check the current text of the Rules and SFC guidance for the applicable renewal mechanism; do not assume a broad or indefinite authorisation is valid.

Renewal and ongoing control

An authority that has expired cannot simply be treated as continuing because the client once signed it. The firm should monitor the expiry date and obtain renewal using the required procedure before relying on the permission. The Rules contain safeguards around renewal and client notification. A professional-investor relationship does not automatically erase every safeguard; identify the specific provision and any valid exception before choosing an answer.

The client-asset boundary

A standing authority is permission for a defined kind of handling. It does not convert client securities into the intermediary's own property or create unlimited discretion. Custody, segregation, client-money handling, and contract terms continue to matter. Records should show the authority, its current status, the transaction carried out, and the securities or collateral affected.

Exam traps

• Calling a continuing permission a one-off instruction because a client agreed verbally.
• Assuming any signed form is valid regardless of scope, disclosures, expiry, or renewal.
• Assuming professional-investor status automatically removes all standing-authority safeguards.
• Treating an authority over securities as permission to use client money.
• Continuing to rely on an expired authority without a compliant renewal.

Key takeaway

Classify the permission by what it lets the firm do and for how long. A transaction-specific sale direction is distinct from continuing authority. For a standing authority, check written form, purpose, disclosure, duration, renewal, and actual use against the Rules.

Scope, consent and expiry

A standing authority is a client’s continuing permission for specified handling or use of securities under the Client Securities Rules. It must be obtained and maintained in the form required by the rules, with the relevant purpose and scope made clear to the client. The firm should track the effective date and any renewal or expiry requirements, and provide the required notice before the authority lapses. A broad account-opening signature should not be treated as blanket permission for every later transfer, pledge or lending arrangement.

Renewal and revocation controls

The firm should have a central register of authorities, with alerts before expiry, evidence of renewal and operational blocks when an authority is missing or no longer valid. Staff should know how a client can revoke the authority and how quickly that revocation propagates to custody, lending and settlement systems. Open transactions may require careful handling under the governing terms, but a revoked authority should not be used to initiate new activity. Keep time-stamped evidence of receipt, processing and communication back to the client.

Client explanation and monitoring

Before seeking consent, explain in plain language what assets may be used, for what purpose, by which entity, and what risks or consequences follow. The firm should not bury the key effect in dense boilerplate or imply the authority is mandatory if it is optional. Supervisors should monitor use against the authorized scope and investigate transfers that do not reconcile with the register. Periodic sample testing can identify stale forms, wrong-account use, incomplete dates or mismatches between the agreement and actual operations.

Exam application

The exam distinction is between a valid standing authorization and a one-off transaction instruction. A standing authority may cover only the uses permitted by the rules and described in the authorization; it is not an unlimited waiver of client asset protections. Ask whether it is valid, current, properly explained and being used for an allowed purpose. Do not confuse it with a discretionary trading mandate: permission to manage investments does not automatically permit the firm to borrow, pledge or otherwise use client securities.

Implementation and review

Client communications around renewal should be sent early enough for a meaningful decision and should not frame non-renewal as a breach or default. The client should understand the consequence of allowing the authority to expire, including any effect on an existing facility or service. If the firm relies on an authority for several linked processes, the register should identify each use rather than store a single unexplained “consent” flag. Supervisory testing should compare actual asset movements with the precise authority and investigate every exception.