The recent amendments to the Solicitors Investment Business Rules 1995 (SIBR) were published (see [1998] Gazette, 29 January, 36) and come into force on 31 March 1998.

The new appendix 8 contains the main requirements.

Guidance has also been published (see [1998] Gazette, 11 February, 30).-- Why has the Law Society introduced new rules?The Law Society, in common with all other financial services regulators, had to integrate the Securities and Investments Board's (SIB) 'Standards for the custody of customers' investments' into the Solicitors' Investment Business Rules 1995.

Therefore, similar requirements apply to all authorised firms eg, stockbrokers.

The Financial Services Act 1986 was extended on 1 June 1997 to cover the new investment activity of 'custody of investments'.-- What are title documents?Title documents are documents or evidence (either certificated or uncertificated) of title to an investment eg, share or unit trust certificates, life policies, pension contracts and dematerialised investments.

Therefore, the term title documents does not include wills, leases, miscellaneous documents or deeds.-- What are custody services?Custody services essentially means safeguarding and administering investments.

A firm which is merely holding investments for safekeeping will not be caught by the new rules.

However, a firm which is holding a share certificate for safe custody and collecting and dealing with dividends is likely to be undertaking custody business.

Brief guidance is contained in the new rules themselves but the SIB's custody guidance is available free from the Law Society's professional ethics division.-- Is there an exemption for solicitor/personal representatives or solicitor/trustees?Yes, rule 17(2) of the SIBR makes it clear that the new rule does not apply to the provision of custody services where the firm or a partner, employee or officer of the firm is a personal representative or a trustee (other than a bare trustee), provided that the firm is not separately remunerated for the custody services.

The exemption applies to mixed trusts as well as controlled trusts.-- How is a probate department affected?The new rules will apply where the firm is acting for personal representatives or trustees.

However, generally speaking in probate work, the custody services will be incidental to the winding up of the estate and the exemption in para 10(1) of appendix 8, SIBR will be available - (see rule 10(2) SIBR for the definition of 'activity is incidental').Paragraph 10(1) makes it clear that the requirement to clarify in writing the responsibilities and the need to report to the client will not apply where the 'activity is incidental' or where the firm or a partner, employee or officer of the firm is acting as the donee of any registered enduring power of attorney or as a receiver appointed by the Court of Protection.Similarly, para 9(1) (the need to report to clients) will not apply where the firm or a partner, employee or officer of the firm is acting as the donee of a trustee power of attorney.--What information should be recorded under paragraph 7, appendix 8, SIBR?It is necessary to record the client's name and the details of the investment, for example, that the firm holds a share certificate for 500 Marks and Spencer ordinary £1 shares.

A record must be made of where the title documents are kept eg, in the fireproof safe at the principal office.

And a record must be made of the date on which each title document came into the custody of the firm although, in the case of documents already held on 31 March 1998, it will be sufficient to make a record to that effect.

The date on which the document left the custody of the firm should be recorded and whether the title documents have been lent or held as collateral.-- How often must firms check that they are still holding the title documents?The firm will need to reconcile records at least once a year with the title documents held, its own nominee or a third party custodian.

If there is a discrepancy, the firm must investigate it and make good any shortfall for which it is responsible or provide the equivalent for any shortfall as soon as is reasonably practicable.-- How often must practitioners report to clients?At least once a year, the client must be sent a statement setting out the details of the title documents held for that client as set out in para 9, appendix 8, SIBR.

It is not necessary in that statement to give the information required by para 7 eg, the date on which each title document came into or left the custody of the firm.However, firms may give more information than required by the rules if they so choose.-- If a firm uses a firm of stockbrokers, how do these rules apply?If custody services are being provided either by safeguarding and administering or arranging for the safeguarding and administration of assets, then the rules will apply to the firm of solicitors.If a broker is appointed as a third party custodian, the solicitors' firm will need to comply with para 5, appendix 8, SIBR.

Many firms will have already received agreements from brokers setting out their services because the brokers are complying with their own custody rules which are very similar to solicitors rules.

The third party custodian's agreement will need to cover, where relevant, the matters set out in paras 4(2) and 4(3), appendix 8, SIBR.This will, for example, include clarification in writing in relation to liens and other security.

Lien is ultimately a matter of law and firms will need to consider whether the broker's paragraph clarifying the position as to lien merely reflects the existing common law provision or whether it performs some other function.