Section 7: Principles and Obligations

7. 1 Principles

These Principles represent the overarching spirit of the Rules. All Members must have in place systems and controls that comply with these Principles. Breaching a Principle can potentially lead to removal from Membership as highlighted in section 9.

The Principles apply to all Members.

Principle 1 – Integrity: A Member must act with integrity, including by adopting best practice and responsible business practices, and must be open and cooperative in its dealings with LBMA.

Principle 2 – Skill, care and diligence: A Member must conduct its business with due skill, care and diligence.

Principle 3 – Management and control: A Member must take reasonable care to organise and control its affairs responsibly and effectively, employing adequate risk management systems.

Principle 4 – Financial prudence: A Member must maintain adequate financial resources and records.

Principle 5 – Market conduct: A Member must observe proper standards of market conduct.

7.2 Obligations

All Members must comply with the Code on a continuing basis and follow the Obligations set out below.

These Obligations apply to all Members, with the exception of section 7.3, which applies to Reporting Members only. Failure to meet the requirements of this section can potentially lead to the Membership being suspended or revoked, as provided under section 9. The determination of any sanction is based on the sole discretion of the ExCom.

7.2.1 Governance

Members must have an effective governance framework that ensures accountability and oversight of their business. Members must also have a compliance and risk framework that provides for a robust control and compliance environment, and that identifies and manages the risks associated with their engagement in the market.

Every Member must:
a) Ensure that it is appropriately incorporated and structured in the relevant jurisdiction.
b) Ensure that the named contact representing its organisation has the authority to interact with LBMA.
c) Deal with LBMA or its representatives in an open and cooperative manner, and keep LBMA promptly informed of anything concerning the Member that might reasonably be expected to be disclosed to LBMA.

7.2.2 Legal and Compliance

Every Member must:
a) Pass Due Diligence checks and procedures on an ongoing basis.
b) Ensure that any business conducted by it, or through any of its dealers or staff, shall not cause the Member or staff of LBMA to be in breach of any Applicable Laws, which includes, but is not limited to the UK Bribery Act 2010 and FSMA.
c) Comply with all relevant economic/trade sanctions lists, which for the avoidance of doubt include, but are not limited to the UN, EU, UK and US sanction lists. Breach of relevant economic/trade sanctions lists could lead to immediate removal from Membership.
d) Have appropriate anti-money laundering and financial crime systems, controls and procedures in place. The adequacy of such procedures must be satisfactory to address the risk that Membership may be used for any improper purpose and to address any requirements under the Applicable Laws.
e) Ensure that all global wholesale precious metals market business is conducted with integrity and complies with the principles of the Code. The Member must be able to attest its compliance to the Code by signing a Statement of Commitment, which is provided in Schedule 1.

7.2.3 Business Conduct

Every Member must:
a) Organise and control its internal affairs in a responsible and effective manner by employing appropriate and adequate risk management systems.
b) Ensure that all of its dealers, staff and directors involved in the conduct of business in any regulated market or on a recognised exchange are fit and proper, suitable, appropriately and adequately trained, properly supervised and, where appropriate,
suitably qualified.
c) Have appropriate and adequate business continuity plans.

7.2.4 Notification of Change

Every Member must promptly notify LBMA if there has been a change in:
a) Name;
b) Registered address;
c) Ownership or majority shareholding and, in particular, where any person becomes or ceases to be, or proposes to become or ceases to be, a controller;
d) If a person of political influence is an owner, shareholder or director;
e) Corporate/partnership structure;
f) LBMA primary contact;
g) Governance which has a material impact on the organisation;
h) Any permission(s) or relevant exclusion(s) used by such person to carry on a regulated activity by the UK Financial Conduct Authority (or an equivalent regulator) – for example, if there has been a variation or cancellation of a permission; or
i) Any other particulars provided in the original application.

This notification of change must be made in writing by the primary contact of the Member, addressed to the Chief Executive and sent to mail@lbma.org.uk.

On receipt of the notification of change, the ExCom may review the suitability of the Member. The ExCom may require the Member to provide additional information to help with the review. If, at the end of the review, the ExCom is not satisfied that the Member continues to fulfil the criteria for Membership, the ExCom may suspend/terminate the rights of the Member as outlined in section 9.

7.3 Additional Obligations for Reporting Members

All Reporting Members are required to comply with the Trade Reporting Requirements and to report all Reportable Products to LBMA Trade Data at the end of each business day, in accordance with the Trade Data reporting standards set out in the LBMA Trade Data Governance Framework. LBMA Trade Data Governance Framework is available here.

Reporting Members must report all Reportable Data to the extent that they do not have any other conflicting commitments, for example, client contractual obligations.

All Reporting Members must pay due regard to the integrity of their reported trade data, ensuring that it is accurate, fair and not misleading. Each Reporting Member is required to ensure that its internal trade record-keeping is appropriate and adequate, and that it is capable of complying with the Trade Reporting Requirements and rules using LBMA Trade Data.

If a Reporting Member consistently fails to report trades promptly and correctly to LBMA Trade Data, or is unwilling to do so, this would be deemed a breach of these Rules and the Reporting Member would be subject to the options outlined in section 9. Consistent failures to report can include: (i) missing deadlines for reporting trades to LBMA; (ii) submitting incorrect trades to LBMA, requiring continuous amendments; or (iii) lack of engagement and response to LBMA in its requests for information relating to Trade Reporting, if any of these occur over a period lasting longer than five consecutive days.

These Trade Reporting Requirements are in addition to any other transaction reporting requirements that may apply to a Reporting Member under the Applicable Laws or otherwise.