Handbook at 22 October, 2014

Printed on 22 October, 2014

Combined View / CASS

CASS 1.1 Application and purpose

Application

CASS 1.1.1
01/12/2004
FCA
CASS applies to a firm as specified in the remainder of this chapter.

Purpose

CASS 1.1.2
01/12/2004
FCA
The purpose of this chapter is to set out to whom, for what activities, and within what territorial limits the rules, evidential provisions and guidance in CASS apply.

CASS 1.2 General application: who? what?

General application: who?

CASS 1.2.1
01/12/2004
FCA
The rules in CASS 1.2 set out the maximum scope of this sourcebook. The application of CASS is modified for certain activities by 1CASS 1.4. Also particular chapters or sections of CASS may have provisions which limit their application.
CASS 1.2.2
01/12/2004
FCA
CASS applies to every firm, except as provided for in CASS 1.2.3 R, with respect to the carrying on of:
(1) all regulated activities except to the extent that a provision of CASS provides for a narrower application; and
(2) unregulated activities to the extent specified in any provision of CASS.
CASS 1.2.3
01/12/2004
FCA
CASS does not apply to:
(1) an ICVC; or
(2) an incoming EEA firm other than an insurer, with respect to its passported activities; or
(3) a UCITS qualifier.
CASS 1.2.4
01/11/2007
FCA
With the exception of this chapter and the insurance client money chapter, CASS does not apply to:
(1) an authorised professional firm with respect to its non-mainstream regulated activities; or
(2) the Society.
CASS 1.2.5
01/04/2013
FCA
The insurance client money chapter does not apply to an authorised professional firm with respect to its non-mainstream regulated activities, which are insurance mediation activities, if:
(1) the firm's designated professional body has made rules which implement article 4 of the Insurance Mediation Directive;
(2) those rules have been approved by the FCA under section 332(5) of the Act; and
(3) the firm is subject to the rules in the form in which they were approved.
CASS 1.2.6
01/11/2007
[deleted]

General application: what?

CASS 1.2.7
01/07/2014
FCA
(1) [deleted]
(2) [deleted]
(3) [deleted]
(3A) [deleted]
(4) [deleted]
(5) [deleted]
(6) [deleted]
(7) The debt management client money chapter applies to CASS debt management firms receiving or holding client money for, or on behalf of, a client in the course of or in connection with debt management activity.

Application for retail clients, professional clients and eligible counterparties

CASS 1.2.8
01/07/2014
FCA
(1) CASS applies directly in respect of activities conducted with or for all categories of clients.
(2) [deleted]
(3) The insurance client money chapter does not generally distinguish between different categories of client. However, the term consumer is used for those to whom additional obligations are owed, rather than the term retail client. This is to be consistent with the client categories used in the Insurance: New Conduct of Business sourcebook.
(4) Each provision in the collateral rules, custody chapter, the client money chapter and CASS 9 (Information to clients) makes it clear whether it applies to activities carried on for retail clients, professional clients or both.
(4A) There is no further modification of the rules in the chapters referred to in (4) for activities carried on for eligible counterparties. Such clients are treated in the same way as other professional clients for the purposes of these rules.
(5) The debt management client money chapter generally applies in respect of relevant dealings with the client category known as customers. In general, the client categories of retail clients, professional clients, as well as eligible counterparties, have no relevance to credit-related regulated activities, including debt management activities.
CASS 1.2.9
01/11/2007
[deleted]

Application for affiliates

CASS 1.2.9A
01/07/2014
FCA
(1) The fact that a firm's client is an affiliated company for MiFID business does not affect the operation of CASS to the firm in relation to that client.
(2) For business that is not MiFID business, the operation of the custody chapter or the client money chapter may differ if a firm's client is an affiliated company and depending on certain other conditions (see, for example, CASS 6.1.10B R and CASS 7.1.12A R).

Investments and money held under different regimes

CASS 1.2.10
01/01/2009
[deleted]
CASS 1.2.11
01/07/2014
FCA
(1) A firm must not keep money in respect of which any one of the following chapters applies in the same client bank account or client transaction account as money in respect of which another of the following chapters applies:
(a) the client money chapter;
(b) the insurance client money chapter;
(c) the debt management client money chapter.
(2) In accordance with CASS 7.1.15H R, a firm which is subject to the client money chapter and holds money both (i) in its capacity as a trustee firm and (ii) other than in its capacity as a trustee firm must not keep money held in its capacity as a trustee firm in the same client bank account or client transaction account as money held other than in its capacity as a trustee firm.
(3) To the extent that the restriction under (1) or (2) applies to a firm, the client bank accounts and client transaction accounts that a firm holds in respect of different chapters or in its different capacities (as the case may be) must be separately designated.
CASS 1.2.12
01/11/2007
FCA
The purpose of the rules regarding the segregation of investments and money held under different regimes is to reduce the risk of confusion between assets held under different regimes either on an on-going basis or on the failure of a firm or a third party holding those assets.
CASS 1.2.13
01/07/2014
FCA
A firm may, where permitted by the relevant rules opt to hold under a single chapter money that would otherwise be held under different chapters (see CASS 7.1.3 R and CASS 7.1.15BA R). However, making such an election does not remove the requirement under CASS 1.2.11R (1).

CASS 1.3 General application: where?

CASS 1.3.1
01/12/2004
FCA
The rules in CASS 1.3 set out the maximum territorial scope of this sourcebook. Particular rules may have express territorial limitations.

UK establishments: general

CASS 1.3.2
01/12/2004
FCA
Except as provided for in CASS 1.2.3 R (2), CASS applies to every firm, in relation to regulated activities carried on by it from an establishment in the United Kingdom.

UK firms: passported activities from EEA branches

CASS 1.3.3
01/12/2004
FCA
CASS applies to every UK firm, other than an insurer, in relation to passported activities carried on by it from a branch in another EEA State.
CASS 1.3.4
01/11/2007
FCA
CASS does not apply to an incoming ECA provider acting as such.

CASS 1.4 Application: particular activities

Occupational pension scheme firms (OPS firms)

CASS 1.4.1
01/12/2004
FCA
In the case of OPS activity undertaken by an OPS firm, CASS applies with the following general modifications:
(1) references to customer are to the OPS or welfare trust, whichever fits the case, in respect of which the OPS firm is acting or intends to act, and with or for the benefit of which the relevant activity is to be carried on; and
(2) if an OPS firm is required by any rule in CASS to provide information to, or obtain consent from, a customer, that firm must ensure that the information is provided to, or consent obtained from, each of the trustees of the OPS or welfare trust in respect of which that firm is acting, unless the context requires otherwise.

Stock lending activity with or for clients

CASS 1.4.2
01/01/2009
FCA
(1) The custody chapter and the client money chapter apply in respect of any stock lending activity that is undertaken with or for a client by a firm.
(2) The collateral rules apply, where relevant, in respect of stock lending activity.

Corporate finance business

CASS 1.4.3
01/01/2009
FCA
(1) The custody chapter and the client money chapter apply in respect of corporate finance business that is undertaken by a firm.
(2) The collateral rules apply, where relevant, in respect of corporate finance business.

Oil market activity and energy market activity

CASS 1.4.4
01/01/2009
FCA
(1) The custody chapter and the client money chapter apply in respect of oil market activity and other energy market activity that is undertaken by a firm.
(2) The collateral rules apply, where relevant, in respect of energy market activity.

Appointed representatives and tied agents

CASS 1.4.5
01/11/2007
FCA
(1) Although CASS does not apply directly to a firm's appointed representatives, a firm will always be responsible for the acts and omissions of its appointed representatives in carrying on business for which the firm has accepted responsibility (section 39(3) of the Act). In determining whether a firm has complied with any provision of CASS, anything done or omitted by a firm's appointed representative (when acting as such) will be treated as having been done or omitted by the firm (section 39(4) of the Act). Equally, CASS does not apply directly to tied agents. A MiFID investment firm will be fully and unconditionally responsible for the acts and omission of the tied agents that it appoints.
(2) Firms should also refer to SUP 12 (Appointed representatives), which sets out requirements which apply to firms using appointed representatives and tied agents.

Depositaries

CASS 1.4.6
01/01/2009
FCA
The client money chapter does not apply to a depositary when acting as such.
CASS 1.4.6A
22/07/2013
FCA
Firms acting as trustee or depositary of an AIF are reminded of the obligations in FUND 3.11 (Depositaries) and Chapter IV (Depositary) of the AIFMD level 2 regulation which apply in addition to those in CASS.
CASS 1.4.7
22/07/2013
FCA
Subject to CASS 1.4.6 R, CASS applies to a depositary, when acting as such, with the following general modification: 'client' means 'trustee', 'trust', 'AIF', 'AIFM acting on behalf of the AIF', or 'collective investment scheme', as appropriate.
CASS 1.4.8
01/07/2014
(1) Other than the mandate rules, CASS does not apply to a trustee firm which is not a depositary, or the trustee of a personal pension scheme or stakeholder pension scheme, unless MiFID applies to it, in which case the custody chapter and the client money chapter do apply.
(2) In the custody chapter, the client money chapter and the mandate rules, 'client' means 'trustee', 'trust', 'trust instrument' or 'beneficiary', as appropriate.
CASS 1.4.8A
01/07/2014
FCA
(1) The application of CASS for a trustee firm acting as a depositary is set out in CASS 1.4.6 R and CASS 1.4.7 R.
(2) The application of CASS for a trustee firm that is not acting as a depositary is limited as follows:
(a) the mandate rules apply;
(b) for MiFID business, the custody chapter and the client money chapter apply; and
(c) for business that is not MiFID business, the custody chapter and the client money chapter apply only to trustee firms acting as trustees of personal pension schemes or stakeholder pension schemes, including SIPPs.
(3) To the extent that CASS applies to a trustee firm, it applies with the following general modification: 'client' means 'relevant trustee', 'trust', or 'beneficiary', as appropriate.

Auction regulation bidding

CASS 1.4.9
27/07/2012
FCA
Where a firm carries on auction regulation bidding it may elect to comply with CASS (but not CASS 5) in respect of this activity, subject to the general modifications in CASS 1.4.10 R.
CASS 1.4.10
27/07/2012
FCA
Where a firm has made an election in accordance with CASS 1.4.9 R, CASS is modified so that in relation to that firm:
(1) each reference to:
(a) designated investments;
(b) safe custody assets; and
(c) contingent liability investments;
includes a reference to a two-day emissions spot;
(2) each reference to designated investment business includes auction regulation bidding;
(3) each reference to safeguarding and administering investments, including safeguarding and administration of assets (without arranging) and arranging safeguarding and administration of assets, includes those activities where they are carried on in relation to a two-day emissions spot; and
(4) the reference in CASS 6.2.3A R to an 'emissions auction product that is a financial instrument' includes a two-day emissions spot;
CASS 1.4.11
27/07/2012
FCA
The effect of CASS 1.4.10 R is that when a firm makes an election in accordance with CASS 1.4.9 R:
(1) a two-day emissions spot falls within the scope of each chapter in CASS (save for CASS 5), for example:
(a) the reference in CASS 6.1.1 R (1)(b) to safeguarding and administering investments is modified to include the activity of safeguarding and administering a two-day emissions spot; and
(b) any money that the firm receives or holds for or on behalf of a client in the course of or in connection with its auction regulation bidding activities will be treated as client money and so will need to be dealt with in accordance with the client money rules; and
(2) that election also has effect in relation to rules and guidance elsewhere in the Handbook, including:
(a) COBS 3 (Client categorisation);
(b) COBS 6.1.7 R (Information concerning safeguarding of designated investments belonging to clients and client money);
(c) COBS 6.1.11 R (Timing of disclosure);
(d) COBS 16.4 (Statements of client designated investments or client money);
(e) SUP 3 (Auditors);
(f) SUP 10A.4.4 R (the table of controlled functions) and SUP 10A.7.9 R (CASS operational oversight function (CF10a)); and
(g) SUP 16.14 (Client money and asset return).
CASS 1.4.12
27/07/2012
FCA
The option to elect to comply with CASS set out in CASS 1.4.9 R only applies to the extent the firm is carrying on auction regulation bidding. Where a firm is carrying on MiFID business bidding, CASS applies to it in accordance with the general application rules in CASS for a firm that is carrying on MiFID business.
CASS 1.4.13
27/07/2012
FCA
Where a firm makes an election in accordance with CASS 1.4.9 R it must:
(1) make a written record of the election, including the date from which the election is to be effective, on the date it makes the election;
(2) keep that record from the date that it is made for a period of five years after ceasing to use the opt in.
CASS 1.4.14
27/07/2012
FCA
Where a firm that has opted in to CASS under CASS 1.4.9 R subsequently decides to cease its use of that opt in it must:
(1) make a written record of this decision, including the date from which the decision is to be effective, on the date it takes the decision;
(2) keep that record from the date that it is made for a period of five years after the date it is to be effective; and
(3) discharge any outstanding fiduciary obligations that had arisen because the firm had elected to comply with CASS.

Debt management activities

CASS 1.4.15
01/04/2014
FCA
(1) The debt management client money chapter applies to CASS debt management firms receiving or holding client money.
(2) The mandate rules apply, where relevant, to CASS debt management firms carrying on debt management activity.

CASS 1.5 Application: electronic media and E-Commerce

Application to electronic media

CASS 1.5.1
01/12/2004
FCA
GEN 2.2.14 R (References to writing) has the effect that electronic media may be used to make communications that are required by the Handbook to be "in writing" unless a contrary intention appears.
CASS 1.5.2
01/12/2004
FCA
For any electronic communication with a customer, a firm should:
(1) have in place appropriate arrangements, including contingency plans, to ensure the secure transmission and receipt of the communication; it should also be able to verify the authenticity and integrity of the communication; the arrangements should be proportionate and take into account the different levels of risk in a firm's business;
(2) be able to demonstrate that the customer wishes to communicate using this form of media; and
(3) if entering into an agreement, make it clear to the customer that a contractual relationship is created that has legal consequences.
CASS 1.5.3
01/12/2004
FCA
Firms should note that GEN 2.2.14 R does not affect any other legal requirement that may apply in relation to the form or manner of executing a document or agreement.
CASS 1.5.4
01/11/2007
[deleted]

CASS 1A.1 Application

CASS 1A.1.1
01/01/2013
FCA
(1)  Subject to (2) , (3) and (4) , this chapter applies to a firm to which either or both of CASS 6 (Custody rules) and CASS 7 (Client money rules) applies.
(2)  In relation to a firm to which CASS 5 (Client money: insurance mediation activity) and CASS 7 (Client money rules) apply, this chapter does not apply in relation to client money that a firm holds in accordance with CASS 5 .
(3)  The rules and guidance in CASS 1A.2 apply to a firm even if at the date of the determination or, as the case may be, the notification, either or both of CASS 6 and CASS 7 do not apply to it, provided that:
(a)  either or both of those chapters applied to it during part or all of the previous calendar year; or
(b)  it projects that either or both will apply to it in the current calendar year.
(4)  This chapter does not apply to a firm to which only CASS 6 applies, applied or is projected to apply, merely because it is, was, or is projected to be a firm which arranges safeguarding and administration of assets.

CASS 1A.2 CASS firm classification

CASS 1A.2.1
01/01/2013
FCA
The application of certain rules in this chapter depends upon the 'CASS firm type' within which a firm falls. The 'CASS firm types' are defined in accordance with CASS 1A.2.7 R . The 'CASS firm type' within which a firm falls is also used to determine whether it is required to have the CASS operational oversight function described in CASS 1A.3.1A R and whether the reporting obligations in SUP 16.14 (Client money and asset return) apply to it.
CASS 1A.2.2
01/01/2013
FCA
(1)  A firm must once every year, and by the time it is required to make a notification in accordance with CASS 1A.2.9R (4), determine whether it is a CASS large firm, CASS medium firm or a CASS small firm according to the amount of client money or safe custody assets which it holds, using the limits set out in the table in CASS 1A.2.7 R.
(2)  For the purpose of determining its 'CASS firm type' in accordance with CASS 1A.2.7 R, a firm must:
(a)  if it currently holds client money or safe custody assets, calculate the higher of the highest total amount of client money and the highest total value of safe custody assets held during the previous calendar year ending on 31 December and use that figure to determine its 'CASS firm type';
(b)  if it did not hold client money or safe custody assets in the previous calendar year but projects that it will do so in the current calendar year, calculate the higher of the highest total amount of client money and the highest total value of safe custody assets that it projects that it will hold during that year and use that figure to determine its 'CASS firm type'; but
(c)  in either case, exclude from its calculation any client money held in accordance with CASS 5 (Client money: insurance mediation activity).
CASS 1A.2.3
01/01/2011
FCA
For the purpose of calculating the value of the total amounts of client money and safe custody assets that it holds on any given day during a calendar year a firm must:
(1)  in complying with CASS 1A.2.2R (2)(a) , base its calculation upon internal reconciliations performed during the previous year;
(2)  in relation to client money or safe custody assets denominated in a currency other than sterling, translate the value of that money or that safe custody assets into sterling at the previous day's closing spot exchange rate; and
(3)  in relation to safe custody assets only, calculate their total value using the previous day's closing mark to market valuation, or if in relation to a particular safe custody asset none is available, the most recent available valuation.
CASS 1A.2.4
01/01/2011
FCA
One of the consequences of CASS 1A.2.2 R is that a firm that determines itself to be a CASS small firm or a CASS medium firm will, at least if it exceeds during the course of a calendar year either of the limits in CASS 1A.2.7 R that applies to it, become in the next calendar year:
(1)  in the case of a CASS small firm, a CASS medium firm or a CASS large firm; and
(2)  in the case of a CASS medium firm, a CASS large firm.
CASS 1A.2.5
01/04/2013
FCA
(1)  Notwithstanding CASS 1A.2.2 R, provided that the conditions in (2) are satisfied a firm may elect to be treated:
(a)  as a CASS medium firm, in the case of a firm that is classed by the application of the limits in CASS 1A.2.7 R as a CASS small firm; and
(b)  as a CASS large firm, in the case of a firm that is classed by the application of the limits in CASS 1A.2.7 R as a CASS medium firm.
(2)  The conditions to which (1) refers are that in either case:
(a)  the election is notified to the FCA in writing ;
(b)  the notification in accordance with (a) is made at least one week before the election is intended to take effect; and
(c)  the FCA has not objected.
CASS 1A.2.6
01/01/2011
FCA
CASS 1A.2.5 R provides a firm with the ability to opt in to a higher category of 'CASS firm type'. This may be useful for a firm whose holding of client money and safe custody assets is near the upper categorisation limit for a CASS small firm or a CASS medium firm.
CASS 1A.2.7
01/01/2011
FCA
CASS firm types
CASS firm type Highest total amount of client money held during the firm's last calendar year or as the case may be that it projects that it will hold during the current calendar year Highest total value of safe custody assets held by the firm during the firm's last calendar year or as the case may be that it projects that it will hold during the current calendar year
CASS large firm more than £1 billion more than £100 billion
CASS medium firm an amount equal to or greater than £1 million and less than or equal to £1 billion an amount equal to or greater than £10 million and less than or equal to £100 billion
CASS small firm less than £1 million less than £10 million

CASS 1A.2.8
01/01/2013
[deleted]
CASS 1A.2.8A
01/01/2013
[deleted]
CASS 1A.2.9
01/04/2013
FCA
Once every calendar year a firm must notify to the FCA in writing the information specified in (1), (2) or (3) as applicable, and the information specified in (4), in each case no later than the day specified in (1) to (4):
(1)  if it held client money or safe custody assets in the previous calendar year, the highest total amount of client money and the highest total value of safe custody assets held during the previous calendar year, notification of which must be made no later than the fifteenth business day of January; or
(2)  if it did not hold client money or safe custody assets in the previous calendar year but at any point up to the fifteenth business day of January the firm projects that it will do so in the current calendar year, the highest total amount of client money and the highest total value of safe custody assets that the firm projects that it will hold during the current calendar year, notification of which must be made no later than the fifteenth business day of January; or
(3)  in any other case, the highest total amount of client money and the highest total value of safe custody assets that the firm projects that it will hold during the remainder of the current calendar year, notification of which must be made no later than the business day before the firm begins to hold client money or safe custody assets ; and
(4)  in every case, of its 'CASS firm type' classification, notification of which must be made at the same time the firm makes the notification under (1), (2) or (3) .
CASS 1A.2.10
01/01/2013
FCA
For the purpose of the annual notification to which CASS 1A.2.9 Rrefers, a firm must apply the calculation rule in CASS 1A.2.3 R .
CASS 1A.2.11
01/04/2013
FCA
For the purpose of CASS 1A.2.9R (1), the FCA will treat that obligation as satisfied if a firm submitted a CMAR for each period within the previous calendar year in compliance with SUP 16.14.3 R.
CASS 1A.2.12
01/04/2013
FCA
A firm's 'CASS firm type' and any change to it takes effect:
(1)  if the firm notifies the FCA in accordance with CASS 1A.2.9 R (1) or CASS 1A.2.9 R (2) , on 1 February following the notification; or
(2)  if the firm notifies the FCA in accordance with CASS 1A.2.9 R (3), on the day it begins to hold client money or safe custody assets; or
(3)  if the firm makes an election under CASS 1A.2.5 R (1), and provided the conditions in CASS 1A.2.5 R (2) are satisfied, on the day the notification made under CASS 1A.2.5 R (2)(a) states that the election is intended to take effect.
CASS 1A.2.13
01/04/2013
FCA
Any written notification made to the FCA under this chapter should be marked for the attention of: "Client Assets Firm Classification".

CASS 1A.3 Responsibility for CASS operational oversight

CASS 1A.3.1
01/01/2013
FCA
A CASS small firm must allocate to a director performing a significant influence function or a senior manager performing a significant influence function responsibility for:
(1)  oversight of the firm's operational compliance with CASS; and
(2)  reporting to the firm's governing body in respect of that oversight .

CF10a: the CASS operational oversight function

CASS 1A.3.1A
01/04/2013
FCA
A CASS medium firm and a CASS large firm must allocate to a director or senior manager the function of:
(1)  oversight of the operational effectiveness of that firm's systems and controls that are designed to achieve compliance with CASS;
(2)  reporting to the firm's governing body in respect of that oversight; and
(3)  completing and submitting a CMAR to the FCA in accordance with SUP 16.14.
CASS 1A.3.1B
01/10/2011
FCA
CASS 1A.3.1A R describes the controlled function known as the CASS operational oversight function. The table of controlled functions in SUP 10.4.5 R together with SUP 10.7.9 R specify the CASS operational oversight function as a required function for a firm to which CASS 1A.3.1A R applies.
CASS 1A.3.1C
01/04/2013
FCA
If, at the time a firm becomes a CASS medium firm or a CASS large firm in accordance with CASS 1A.2.12 R (1) or CASS 1A.2.12 R (2), the firm is not able to comply with CASS 1A.3.1A R because it has no director or senior manager who is an approved person in respect of the CASS operational oversight function, the firm must:
(1)  take the necessary steps to ensure that it complies with CASS 1A.3.1A R as soon as practicable, which must at least include submitting an application for a candidate in respect of the CASS operational oversight function within 30 business days of the firm becoming a CASS medium firm or a CASS large firm; and
(2)  until such time as it is able to comply with CASS 1A.3.1A R, allocate to a director performing a significant influence function or a senior manager performing a significant influence function responsibility for:
(a)  oversight of the firm's operational compliance with CASS;
(b)  reporting to the firm's governing body in respect of that oversight; and
(c)  completing and submitting the CMAR to the FCA in accordance with SUP 16.14.
CASS 1A.3.2
01/10/2011
[deleted]
CASS 1A.3.3
01/01/2013
FCA
(1)  Subject to (2), a firm must make and retain an appropriate record of the person to whom responsibility is allocated in accordance with CASS 1A.3.1 R , CASS 1A.3.1A R or CASS 1A.3.1C R (2) .
(2)  A CASS small firm must make and retain such a record only where it allocates responsibility to a person other than the person in that firm who performs the compliance oversight function.
(3)  A firm must ensure that the record made under this rule is retained for a period of five years after it is made.
31/12/2008 is the last day this material was in force

CASS 3.1 Application and Purpose

Application

CASS 3.1.1
01/11/2007
FCA
This chapter applies to a firm when it receives or holds assets in connection with an arrangement to secure the obligation of a client in the course of, or in connection with, its designated investment business, including MiFID business.
CASS 3.1.2
01/11/2007
FCA
Firms are reminded that this chapter does not apply to an incoming EEA firm, other than an insurer, with respect to its passported activities. The application of this chapter is also dependent on the location from which the activity is undertaken (see CASS 1.3.2 R and CASS 1.3.3 R).
CASS 3.1.3
01/11/2007
FCA
This chapter does not apply to a firm that has only a bare security interest (without rights to hypothecate) in the client's asset. In such circumstances, the firm must comply with the custody rules or client money rules as appropriate.
CASS 3.1.4
01/11/2007
FCA
For the purpose of this chapter only, a bare security interest in the client's asset gives a firm the right to realise the assets only on a client's default and without the right to use other than in default.

Purpose

CASS 3.1.5
01/11/2007
FCA
The purpose of this chapter is to ensure that an appropriate level of protection is provided for those assets over which a client gives a firm certain rights. The arrangements covered by this chapter are those under which the firm is given a right to use the asset, and the firm treats the asset as if legal title and associated rights to that asset had been transferred to the firm subject only to an obligation to return equivalent assets to the client upon satisfaction of the client's obligation to the firm. The rights covered in this chapter do not include those arrangements by which the firm has only a bare security interest in the client's asset (in which case the custody rules or client money rules apply).
CASS 3.1.6
01/11/2007
FCA
Examples of the arrangements covered by this chapter include the taking of collateral by a firm, under the ISDA English Law (transfer of title) and the New York Law Credit Support Annexes (assuming the right to rehypothecate has not been disapplied).
CASS 3.1.7
01/11/2007
FCA
This chapter recognises the need to apply a differing level of regulatory protection to the assets which form the basis of the two different types of arrangement described in CASS 3.1.5 G. Under the bare security interest arrangement, the asset continues to belong to the client until the firm's right to realise that asset crystallises (that is, on the client's default). But under a "right to use arrangement", the client has transferred to the firm the legal title and associated rights to the asset, so that when the firm exercises its right to treat the asset as its own, the asset ceases to belong to the client and in effect becomes the firm's asset and is no longer in need of the full range of client asset protection. The firm may exercise its right to treat the asset as its own by, for example, clearly so identifying the asset in its own books and records.
CASS 3.1.7A
01/07/2014
FCA
Firms are reminded of the client's best interests rule which requires a firm to act honestly, fairly and professionally, in accordance with the best interests of its clients, when agreeing to, entering into, exercising its rights under and fulfilling its obligations under an arrangement covered by this chapter, and when structuring its business to include such arrangements.
CASS 3.1.8
01/03/2011
FCA
A prime brokerage firm is reminded of the additional obligations in CASS 9.3.1R which apply to prime brokerage agreements.

CASS 3.2 Requirements

Application

CASS 3.2.1
01/11/2007
[deleted]
CASS 3.2.2
01/11/2007
FCA
A firm that receives or holds a client's assets under an arrangement to which this chapter applies and which exercises its right to treat the assets as its own must ensure that it maintains adequate records to enable it to meet any future obligations including the return of equivalent assets to the client.
CASS 3.2.3
01/12/2004
FCA
If the firm has the right to use the client's asset under a "right to use arrangement" but has not yet exercised its right to treat the asset as its own, the client money rules or the custody rules will continue to apply as appropriate until such time as the firm exercises its right, at which time CASS 3.2.2 R will apply.
CASS 3.2.4
06/04/2010
FCA
When appropriate, firms that enter into the arrangements with retail clientscovered in this chapter will be expected to identify in the statement of custody assets sent to the client in accordance with COBS 16.4 (Statements of client designated investments or client money) details of the assets which form the basis of the arrangements. Where the firm utilises global netting arrangements, a statement of the assets held on this basis will suffice.
31/12/2008 is the last day this material was in force

CASS 5.1 Application

CASS 5.1.1
06/04/2010
FCA
(1) CASS 5.1 to CASS 5.6 apply, subject to (2), (3) and CASS 5.1.3 R to CASS 5.1.6 R, to a firm that receives or holds money in the course of or in connection with its insurance mediation activity.
(2) CASS 5.1 to CASS 5.6 do not, subject to (3), apply:
(a) to a firm to the extent that it acts in accordance with the client money chapter; or
(b) to a firm in carrying on an insurance mediation activity which is in respect of a reinsurance contract; or
(c) to an insurance undertaking in respect of its permitted activities; or
(d) to a managing agent when acting as such; or
(e) with respect to money held by a firm which:
(i) is an approved bank; and
(ii) has requisite capital under article 4(4)(b) of the Insurance Mediation Directive;
but only when held by the firm in an account with itself, in which case the firm must notify the client (whether through a client agreement, terms of business, or otherwise in writing) that:
(iii) money held for that client in an account with the approved bank will be held by the firm as banker and not as trustee (or in Scotland as agent); and
(iv) as a result, the money will not be held in accordance with CASS 5.1 to CASS 5.6.
(3) A firm may elect to comply with:
(a) CASS 5.1 to CASS 5.6 in respect of client money which it receives in the course of carrying on insurance mediation activity in respect of reinsurance contracts; and
(b) CASS 5.1, CASS 5.2 and CASS 5.4 to CASS 5.6 in respect of money which it receives in the course of carrying on an activity which would be insurance mediation activity, and which money would be client money, but for article 72D of the Regulated Activities Order (Large risks contracts where risk situated outside the EEA);
but the election must be in respect of all the firm's business which consists of that activity.
(4) A firm must keep a record of any election in (3).
CASS 5.1.2
14/01/2005
FCA
A firm that is an approved bank, and relies on the exemption under CASS 5.1.1 R (2)(e), should be able to account to all of its clients for amounts held on their behalf at all times. A bank account opened with the firm that is in the name of the client would generally be sufficient. When money from clients deposited with the firm is held in a pooled account, this account should be clearly identified as an account for clients. The firm should also be able to demonstrate that an amount owed to a specific client that is held within the pool can be reconciled with a record showing that individual's client balance and is, therefore, identifiable at any time.
CASS 5.1.3
09/12/2011
FCA
An authorised professional firm regulated by The Law Society (of England and Wales), The Law Society of Scotland or The Law Society of Northern Ireland that, with respect to its regulated activities, is subject to the rules of its designated professional body as specified in CASS 5.1.4 R, in force on 14 January 2005, must comply with those rules and if it does so, it will be deemed to comply with CASS 5.2 to CASS 5.6.
CASS 5.1.4
14/01/2005
FCA
For the purposes of CASS 5.1.3 R the relevant rules are:
(1) If regulated by the Law Society (of England and Wales);
(a) the Solicitors' Accounts Rules 1998; or
(b) where applicable, the Solicitors Overseas Practice Rules 1990;
(2) if regulated by the Law Society of Scotland, the Solicitors' (Scotland) Accounts, Accounts Certificate, Professional Practice and Guarantee Fund Rules 2001;
(3) if regulated by the Law Society of Northern Ireland, the Solicitors' Accounts Regulations 1998.
CASS 5.1.4A
14/01/2005
FCA
(1)  A firm will, subject to (3), be deemed to comply with CASS 5.3 to CASS 5.6 if it receives or holds client money and it either:
(a)  in relation to a service charge, complies with the requirement to segregate such money in accordance with section 42 of the Landlord and Tenant Act 1987 ("the 1987 Act"); or
(b)  in relation to money which is clients' money for the purpose of the Royal Institution of Chartered Surveyors' Rules of Conduct ("RICS rules") in force as at 14 January 2005, it complies with the requirement to segregate and account for such money in accordance with the RICS Members' Accounts rules.
(2)  Paragraph (1)(a) also applies to a firm in Scotland or in Northern Ireland if in acting as a property manager the firm receives or holds a service charge and complies (so far as practicable) with section 42 of the 1987 Act as if the requirements of that provision applied to it.
(3)  In addition to complying with (1), a firm must ensure that an account in which money held pursuant to the trust fund mentioned in section 42(3) of the 1987 Act or an account maintained in accordance with the RICS rules satisfies the requirements in CASS 5.5.49 R to the extent that the firm will hold money as trustee or otherwise on behalf of its clients.
CASS 5.1.5
14/01/2005
FCA
Subject to CASS 5.1.5A R money is not client money when:
(1) it becomes properly due and payable to the firm:
(a) for its own account; or
(b) in its capacity as agent of an insurance undertaking where the firm acts in accordance with CASS 5.2; or
(2) it is otherwise received by the firm pursuant to an arrangement made between an insurance undertaking and another person (other than a firm) by which that other person has authority to underwrite risks, settle claims or handle refunds of premiums on behalf of that insurance undertaking outside the United Kingdom and where the money relates to that business.
CASS 5.1.5A
14/01/2005
FCA
CASS 5.1.5 R (1)(b) and CASS 5.1.5 R (2) do not apply, and hence money is client money, in any case where:
(1)  in relation to an activity specified in CASS 5.2.3 R (1) (a) to CASS 5.2.3 R (1) (c), the insurance undertaking has agreed that the firm may treat money which it receives and holds as agent of the undertaking, as client money and in accordance with the provisions of CASS 5.3 to CASS 5.6; and
(2)  the agreement in (1) is in writing and adequate to show that the insurance undertaking consents to its interests under the trusts (or in Scotland agency) in CASS 5.3.2 R or CASS 5.4.7 R being subordinated to the interests of the firm's other clients.
CASS 5.1.6
14/01/2005
FCA
Except where a firm and an insurance undertaking have (in accordance with CASS 5.1.5A R) agreed otherwise, for the purposes of CASS 5.1 to CASS 5.6 an insurance undertaking (when acting as such) with whom a firm conducts insurance mediation activity is not to be treated as a client of the firm.

Purpose

CASS 5.1.7
01/11/2007
FCA
(1) Principle 10 (Clients' assets) requires a firm to arrange adequate protection for clients' assets when the firm is responsible for them. An essential part of that protection is the proper accounting and handling of client money. The rules in CASS 5.1 to CASS 5.6 also give effect to the requirement in article 4.4 of the Insurance Mediation Directive that all necessary measures should be taken to protect clients against the inability of an insurance intermediary to transfer premiums to an insurance undertaking or to transfer the proceeds of a claim or premium refund to the insured.
(2) There are two particular approaches which firms can adopt which reflect options given in article 4.4. The first is to provide by law or contract for a transfer of risk from the insurance intermediary to the insurance undertaking (CASS 5.2). The second is that client money is strictly segregated by being transferred to client accounts that cannot be used to reimburse other creditors in the event of the firm's insolvency (CASS 5.3 and CASS 5.4 provide different means of achieving such segregation). CASS 5.1.5A R permits a firm subject to certain conditions to treat money which it collects as agent of an insurance undertaking as client money; the principle of strict segregation is, however, satisfied because such undertakings must agree to their interests being subordinated to the interests of the firm's other clients.
CASS 5.1.8
01/11/2007
FCA
Firms which carry on designated investment business which may, for example, involve them handling client money in respect of life assurance business should refer to the non-directive client money chapter which includes provisions enabling firms to elect to comply solely with that chapter or with the insurance client money chapter in respect of that business. Firms that also carry on MiFID or equivalent third country business may elect to comply solely with the MiFID client money chapter with respect of client money in respect of which the non-directive client money chapter or the insurance client money chapter apply.
CASS 5.1.9
14/01/2005
FCA
Firms are reminded that SUP 3 contains provisions which are relevant to the preparation and delivery of reports by auditors.

CASS 5.2 Holding money as agent of insurance undertaking

Introduction

CASS 5.2.1
14/01/2005
FCA
If a firm holds money as agent of an insurance undertaking then the firm's clients (who are not insurance undertakings) will be adequately protected to the extent that the premiums which it receives are treated as being received by the insurance undertaking when they are received by the agent and claims money and premium refunds will only be treated as received by the client when they are actually paid over. The rules in CASS 5.2 make provision for agency agreements between firms and insurance undertakings to contain terms which make clear when money should be held by a firm as agent of an undertaking. Firms should refer to CASS 5.1.5 R to determine the circumstances in which they may treat money held on behalf of insurance undertakings as client money.
CASS 5.2.2
14/01/2005
FCA
(1) Agency agreements between insurance intermediaries and insurance undertakings may be of a general kind and facilitate the introduction of business to the insurance undertaking. Alternatively, an agency agreement may confer on the intermediary contractual authority to commit the insurance undertaking to risk or authority to settle claims or handle premium refunds (often referred to as "binding authorities"). CASS 5.2.3 R requires that binding authorities of this kind must provide that the intermediary is to act as the agent of the insurance undertaking for the purpose of receiving and holding premiums (if the intermediary has authority to commit the insurance undertaking to risk), claims monies (if the intermediary has authority to settle claims on behalf of the insurance undertaking) and premium refunds (if the intermediary has authority to make refunds of premium on behalf of the insurance undertaking). Accordingly such money is not, except where a firm and an insurance undertaking have in compliance with CASS 5.1.5A R agreed otherwise, client money for the purposes of CASS 5.
(2) Other introductory agency agreements may also, depending on their precise terms, satisfy some or all of the requirements of the type of written agreement described in CASS 5.2.3 R. It is desirable that an intermediary should, before informing its clients (in accordance with CASS 5.2.3 R (3)) that it will receive money as agent of an insurance undertaking, agree the terms of that notification with the relevant insurance undertakings.

Requirement for written agreement before acting as agent of insurance undertaking

CASS 5.2.3
06/04/2010
FCA
(1) A firm must not agree to:
(a)  deal in investments as agent for an insurance undertaking in connection with insurance mediation; or
(b)  act as agent for an insurance undertaking for the purpose of settling claims or handling premium refunds; or
(c)  otherwise receive money as agent of an insurance undertaking;
unless:
(d)  it has entered into a written agreement with the insurance undertaking to that effect; and
(e)  it is satisfied on reasonable grounds that the terms of the policies issued by the insurance undertaking to the firm's clients are likely to be compatible with such an agreement; and
(f)  
(i) (in the case of (a)) the agreement required by (d) expressly provides for the firm to act as agent of the insurance undertaking for the purpose of receiving premiums from the firm's clients; and
(ii) (in the case of (b)) the agreement required by (d) expressly provides for the firm to act as agent of the insurance undertaking for the purpose of receiving and holding claims money (or, as the case may be, premium refunds) prior to transmission to the client making the claim (or, as the case may be, entitled to the premium refund) in question.
(2) A firm must retain a copy of any agreement it enters pursuant to (1) for a period of at least six years from the date on which it is terminated.
(3) Where a firm holds, or is to hold, money as agent for an insurance undertaking it must ensure that it informs those of its clients which are not insurance undertakings and whose transactions may be affected by the arrangement (whether in its terms of business, client agreements or otherwise in writing) that it will hold their money as agent of the insurance undertaking and if necessary the extent of such agency and whether it includes all items of client money or is restricted, for example, to the receipt of premiums.
(4) A firm may (subject to the consent of the insurance undertaking concerned) include in an agreement in (1) provision for client money received by its appointed representative, field representatives and other agents to be held as agent for the insurance undertaking (in which event it must ensure that the representative or agent provides the information to clients required by (3)).
CASS 5.2.4
14/01/2005
FCA
Firms are reminded that CASS 5.1.5A R provides that, if the insurance undertaking has agreed in writing, money held in accordance with an agreement made under CASS 5.2.3 R may be treated as client money and may (but not otherwise) be kept in a client bank account.
CASS 5.2.5
14/01/2005
FCA
A firm which provides for the protection of a client(which is not an insurance undertaking) under CASS 5.2 is relieved of the obligation to provide protection for that client under CASS 5.3 or CASS 5.4 to the extent of the items of client money protected by the agency agreement.
CASS 5.2.6
14/01/2005
FCA
A firm may, in accordance with CASS 5.2.3 R (4), arrange for an insurance undertaking to accept responsibility for the money held by its appointed representatives, field representatives, and other agents, in which event CASS 5.5.18 R to CASS 5.5.25 G will not apply.
CASS 5.2.7
14/01/2005
FCA
A firm may operate on the basis of an agency agreement as provided for by CASS 5.2.3 R for some of its clients and with protection provided by a client money trust in accordance with CASS 5.3 or CASS 5.4 for other clients. A firm may also operate on either basis for the same client but in relation to different transactions. A firm which does so should be satisfied that its administrative systems and controls are adequate and, in accordance with CASS 5.2.4 G, should ensure that money held for both types of client and business is kept separate.

CASS 5.3 Statutory trust

CASS 5.3.1
01/04/2013
FCA
Section 137B(1) of the Act (Miscellaneous ancillary matters) provides that rules may make provision which results in client money being held by a firm on trust (England and Wales and Northern Ireland) or as agent (Scotland only). CASS 5.3.2 R creates a fiduciary relationship between the firm and its client under which client money is in the legal ownership of the firm but remains in the beneficial ownership of the client. In the event of failure of the firm, costs relating to the distribution of client money may have to be borne by the trust.
CASS 5.3.2
14/01/2005
FCA
A firm (other than a firm acting in accordance with CASS 5.4) receives and holds client money as trustee (or in Scotland as agent) on the following terms:
(1) for the purposes of and on the terms of CASS 5.3, CASS 5.5 and the client money (insurance) distribution rules;
(2) subject to (4), for the clients (other than clients which are insurance undertakings when acting as such) for whom that money is held, according to their respective interests in it;
(3) after all valid claims in (2) have been met, for clients which are insurance undertakings according to their respective interests in it;
(4) on the failure of the firm, for the payment of the costs properly attributable to the distribution of the client money in accordance with (2) and (3); and
(5)  after all valid claims and costs under (2) to (4) have been met, for the firm itself.
CASS 5.3.3
14/01/2005
FCA
(1) A firm which holds client money can discharge its obligation to ensure adequate protection for its clients in respect of such money by complying with CASS 5.3 which provides for such money to be held by the firm on the terms of a trust imposed by the rules.
(2) The trust imposed by CASS 5.3 is limited to a trust in respect of client money which a firm receives and holds. The consequential and supplementary requirements in CASS 5.5 are designed to secure the proper segregation and maintenance of adequate client money balances. In particular, CASS 5.5 does not permit a firm to use client money balances to provide credit for clients (or potential clients) such that, for example, their premium obligations may be met in advance of the premium being remitted to the firm. A firm wishing to provide credit for clients may however do so out of its own funds.

CASS 5.4 Non-statutory client money trust

Introduction

CASS 5.4.1
06/04/2010
FCA
(1) CASS 5.4 permits a firm, which has adequate resources, systems and controls, to declare a trust on terms which expressly authorise it, in its capacity as trustee, to make advances of credit to the firm's clients. The client money trust required by CASS 5.4 extends to such debt obligations which will arise if the firm, as trustee, makes credit advances, to enable a client's premium obligations to be met before the premium is remitted to the firm and similarly if it allows claims and premium refunds to be paid to the client before receiving remittance of those monies from the insurance undertaking.
(2) CASS 5.4 does not permit a firm to make advances of credit to itself out of the client money trust. Accordingly, CASS 5.4 does not permit a firm to withdraw commission from the client money trust before it has received the premium from the client in relation to the non-investment insurance contract which generated the commission.

Voluntary nature of this section

CASS 5.4.2
14/01/2005
FCA
A firm may elect to comply with the requirements in this section, and may do so for some of its business whilst complying with CASS 5.3 for other parts.
CASS 5.4.3
14/01/2005
FCA
A firm is not subject to CASS 5.3 when and to the extent that it acts in accordance with this section.

Conditions for using the non-statutory client money trust

CASS 5.4.4
01/01/2007
FCA
A firm may not handle client money in accordance with the rules in this section unless each of the following conditions is satisfied:
(1) the firm must have and maintain systems and controls which are adequate to ensure that the firm is able to monitor and manage its client money transactions and any credit risk arising from the operation of the trust arrangement and, if in accordance with CASS 5.4.2 R a firm complies with both the rules in CASS 5.3 and CASS 5.4, such systems and controls must extend to both arrangements;
(2) the firm must obtain, and keep current, written confirmation from its auditor that it has in place systems and controls which are adequate to meet the requirements in (1);
(3) the firm must designate a manager with responsibility for overseeing the firm's day to day compliance with the systems and controls in (1) and the rules in this section;
(4) the firm (if, under the terms of the non-statutory trust, it is to handle client money for retail customers) must have and at all times maintain capital resources of not less than £50,000 calculated in accordance with MIPRU 4.4.1 R; and
(5) in relation to each of the clients for whom the firm holds money in accordance with CASS 5.4, the firm must take reasonable steps to ensure that its terms of business or other client agreements adequately explain, and obtain the client's informed consent to, the firm holding the client's money in accordance with CASS 5.4 (and in the case of a client which is an insurance undertaking (when acting as such) there must be an agreement which satisfies CASS 5.1.5A R).
CASS 5.4.5
01/01/2007
FCA
The amount of a firm's capital resources maintained for the purposes of MIPRU 4.2.11 R will also satisfy (in whole or in part) the requirement in CASS 5.4.4 R (4).

Client money to be received under the non-statutory client money trust

CASS 5.4.6
14/01/2005
FCA
Except to the extent that a firm acts in accordance with CASS 5.3, afirm must not receive or hold any client money unless it does so as trustee (or, in Scotland, as agent) and has properly executed a deed (or equivalent formal document) to that effect.

Contents of trust deed

CASS 5.4.7
14/01/2005
FCA
The deed referred to in CASS 5.4.6 R must provide that the money (and, if appropriate, designated investments) are held:
(1) for the purposes of and on the terms of:
(a) CASS 5.4;
(b) the applicable provisions of CASS 5.5; and
(c) the client money (insurance) distribution rules
(2) subject to (4 ), for the clients (other than clients which are insurance undertakings when acting as such) for whom that money is held, according to their respective interests in it;
(3) after all valid claims in (2) have been met for clients which are insurance undertakings according to their respective interests in it;
(4) on failure of the firm, for the payment of the costs properly attributable to the distribution of the client money in accordance with (2) and (3); and
(5)  after all valid claims and costs under (2) to (4) have been met, for the firm itself.
CASS 5.4.8
14/01/2005
FCA
The deed (or equivalent formal document) referred to in CASS 5.4.6 R may provide that:
(1) the firm, acting as trustee (or, in Scotland, as agent), has power to make advances or give credit to clients or insurance undertakings from client money, provided that it also provides that any debt or other obligation of a client or resulting obligation of an insurance undertaking, in relation to an advance or credit, is held on the same terms as CASS 5.4.7 R;
(2) the benefit of a letter of credit or unconditional guarantee provided by an approved bank on behalf of a firm to satisfy any shortfall in the firm's client money resource (as calculated under CASS 5.5.65 R) when compared with the firm's client money requirement (as calculated under CASS 5.5.66 R or as appropriate CASS 5.5.68 R), is held on the same terms as CASS 5.4.7 R.

CASS 5.5 Segregation and the operation of client money accounts

Application

CASS 5.5.1
14/01/2005
FCA
Unless otherwise stated each of the provisions in CASS 5.5 applies to firms which are acting in accordance with CASS 5.3 (Statutory trust) or CASS 5.4 (Non-statutory trust).
CASS 5.5.2
14/01/2005
FCA
One purpose of CASS 5.5 is to ensure that, unless otherwise permitted, client money is kept separate from the firm's own money. Segregation, in the event of a firm's failure, is important for the effective operation of the trust that is created to protect client money. The aim is to clarify the difference between client money and general creditors' entitlements in the event of the failure of the firm.

Requirement to segregate

CASS 5.5.3
14/01/2005
FCA
A firm must, except to the extent permitted by CASS 5.5, hold client money separate from the firm's money.

Money due to a client from a firm

CASS 5.5.4
14/01/2005
FCA
If a firm is liable to pay money to a client, it must as soon as possible, and no later than one business day after the money is due and payable:
(1) pay it into a client bank account, in accordance with CASS 5.5.5 R; or
(2) pay it to, or to the order of, the client.

Segregation

CASS 5.5.5
14/01/2005
FCA
A firm must segregate client money by either:
(1) paying it as soon as is practicable into a client bank account; or
(2) paying it out in accordance with CASS 5.5.80 R.
CASS 5.5.6
01/04/2013
FCA
The FCA expects that in most circumstances it will be practicable for a firm to pay client money into a client bank account by not later than the next business day after receipt.
CASS 5.5.7
06/01/2008
FCA
Where an insurance transaction involves more than one firm acting in a chain such that for example money is transferred from a "producing" broker who has received client money from a consumer to an intermediate broker and thereafter to an insurance undertaking, each broker firm will owe obligations to its immediate client to segregate client money which it receives (in this example the producing broker in relation to the consumer and the intermediate broker in relation to the producing broker). A firm which allows a third party broker to hold or control client money will not thereby be relieved of its fiduciary obligations (see CASS 5.5.34 R).
CASS 5.5.8
14/01/2005
FCA
A firm may segregate client money in a different currency from that of receipt. If it does so, the firm must ensure that the amount held is adjusted at intervals of not more than twenty five business days to an amount at least equal to the original currency amount (or the currency in which the firm has its liability to its clients, if different), translated at the previous day's closing spot exchange rate.
CASS 5.5.9
14/01/2005
FCA
A firm must not hold money other than client money in a client bank account unless it is:
(1) a minimum sum required to open the account, or to keep it open; or
(2) money temporarily in the account in accordance with CASS 5.5.16 R (Withdrawal of commission and mixed remittance); or
(3) interest credited to the account which exceeds the amount due to clients as interest and has not yet been withdrawn by the firm.
CASS 5.5.10
14/01/2005
FCA
If it is prudent to do so to ensure that client money is protected (and provided that doing so would otherwise be in accordance with CASS 5.5.63 R (1)(b)(ii)), a firm may pay into, or maintain in, a client bank account money of its own, and that money will then become client money for the purposes of CASS 5 and the client money (insurance) distribution rules.
CASS 5.5.11
14/01/2005
FCA
A firm, when acting in accordance with CASS 5.3 (statutory trust), must ensure that the total amount of client money held for each client in any of the firm's client money bank accounts is positive and that no payment is made from any such account for the benefit of a client unless the client has provided the firm with cleared funds to enable the payment to be made.
CASS 5.5.11A
14/01/2005
FCA
When a firm acts in accordance with CASS 5.3 (Statutory trust) it should not make a payment from the client bank account unless it is satisfied on reasonable grounds that the client has provided it with cleared funds. Accordingly, a firm should normally allow a reasonable period of time for cheques to clear. If a withdrawal is made and the client's cheque is subsequently dishonoured it will be the firm's responsibility to make good the shortfall in the account as quickly as possible (and without delay whilst a cheque is re-presented).
CASS 5.5.12
14/01/2005
FCA
If client money is received by the firm in the form of an automated transfer, the firm must take reasonable steps to ensure that:
(1) the money is received directly into a client bank account; and
(2) if money is received directly into the firm's own account, the money is transferred into a client bank account no later than the next business day after receipt.
CASS 5.5.13
14/01/2005
FCA
A firm can hold client money in either a general client bank account (CASS 5.5.38 R) or a designated client bank account (CASS 5.5.39 R). A firm holds all client money in general client bank accounts for its clients as part of a common pool of money so those particular clients do not have a claim against a specific sum in a specific account; they only have a claim to the client money in general. A firm holds client money in designated client bank accounts for those clients who requested that their client money be part of a specific pool of money, so those particular clients do have a claim against a specific sum in a specific account; they do not have a claim to the client money in general unless a primary pooling event occurs. If the firm becomes insolvent, and there is (for whatever reason) a shortfall in money held for a client compared with that client's entitlements, the available funds will be distributed in accordance with the client money (insurance) distribution rules.

Non-statutory trust - segregation of designated investments

CASS 5.5.14
06/01/2008
FCA
(1) A firm which handles client money in accordance with the rules for a non-statutory trust in CASS 5.4 may, to the extent it considers appropriate, but subject to (2), satisfy the requirement to segregate client money by segregating or arranging for the segregation of designated investments with a value at least equivalent to such money as would otherwise have been segregated into a client bank account.
(2) A firm may not segregate designated investments unless it:
(a) takes reasonable steps to ensure that any consumers whose client money interests may be protected by such segregation are aware that the firm may operate such an arrangement and have (whether through its terms of business, client agreements, or otherwise in writing) an adequate opportunity to give their informed consent;
(b) ensures that the terms on which it will segregate designated investments include provision for it to take responsibility for meeting any shortfall in its client money resource which is attributable to falls in the market value of a segregated investment;
(c) provides in the deed referred to in CASS 5.4.6 R for designated investments which it segregates to be held by it on the terms of the non-statutory trust; and
(d) takes reasonable steps to ensure that the segregation is at all times in conformity with the range of permitted investments, general principles and conditions in CASS 5 Annex 1 R.
CASS 5.5.15
14/01/2005
FCA
A firm which takes advantage of CASS 5.5.14 R will need to consider whether its permission should include the permitted activity of managing investments. If the firm is granted a power to manage with discretion the funds over which it is appointed as trustee under the trust deed required by CASS 5.4 then it will be likely to need a permission to manage investments. It is unlikely to need such a permission, however, if it is merely granted a power to invest but the deed stipulates that the funds may only be managed with discretion by another firm (which has the necessary permission). Such an arrangement would not preclude the firm holding client money as trustee from appointing another firm (or firms) as manager and setting an appropriate strategy and overall asset allocation, subject to the limits set out in CASS 5 Ann 1 R. A firm may also need to consider whether it needs a permission to operate a collective investment scheme if any of its clients are to participate in the income or gains arising from the acquisition or disposal of designated investments.

Withdrawal of commission and mixed remittance

CASS 5.5.16
14/01/2005
FCA
(1) A firm may draw down commission from the client bank account if:
(a) it has received the premium from the client (or from a third party premium finance provider on the client's behalf) ; and
(b) this is consistent with the firm's terms of business which it maintains with the relevant client and the insurance undertaking to whom the premium will become payable;
and the firm may draw down commission before payment of the premium to the insurance undertaking, provided that the conditions in (a) and (b) are satisfied.
(2) If a firm receives a mixed remittance (that is part client money and part other money), it must:
(a) pay the full sum into a client bank account in accordance with CASS 5.5.5 R; and
(b) pay the money that is not client money out of the client bank account as soon as reasonably practicable and in any event by not later than twenty-five business days after the day on which the remittance is cleared (or, if earlier, when the firm performs the client money calculation in accordance with CASS 5.5.63 R (1)).
CASS 5.5.17
14/01/2005
FCA
(1) As soon as commission becomes due to the firm (in accordance with CASS 5.5.16 R (1)) it must be treated as a remittance which must be withdrawn in accordance with CASS 5.5.16 R (2). The procedure required by CASS 5.5.16 R will also apply where money is due and payable to the firm in respect of fees due from clients (whether to the firm or other professionals).
(2) Firms are reminded that money received in accordance with CASS 5.2 must not, except where a firm and an insurance undertaking have (in accordance with CASS 5.1.5A R) agreed otherwise, be kept in a client bank account. Client money received from a third-party premium finance provider should, however, be segregated into a client bank account.
(3) Where a client makes payments of premium to a firm in instalments, CASS 5.5.16 R (1) applies in relation to each instalment.
(4)  If a firm is unable to match a remittance with a transaction it may be unable to immediately determine whether the payment comprises a mixed remittance or is client money. In such cases the remittance should be treated as client money while the firm takes steps to match the remittance to a transaction as soon as possible.

Appointed representatives, field representatives and other agents

CASS 5.5.18
06/04/2010
FCA
(1) Subject to (4), a firm must in relation to each of its appointed representatives, field representatives and other agents comply with CASS 5.5.19 R to CASS 5.5.21 R (Immediate segregation) or with CASS 5.5.23 R (Periodic segregation and reconciliation).
(2) A firm must in relation to each representative or other agent keep a record of whether it is complying with CASS 5.5.19 R to CASS 5.5.21 R or with CASS 5.5.23 R.
(3) A firm is, but without affecting the application of CASS 5.5.19 R to CASS 5.5.23 R, to be treated as the recipient of client money which is received by any of its appointed representatives, field representatives or other agents.
(4)  Paragraphs (1) to (3) do not apply in relation to an appointed representative, field representative or other agent to which (if it were a firm) CASS 5.1.4AR (1) or CASS 5.1.4AR (2) would apply, but subject to the representative or agent maintaining an account which satisfies the requirements of CASS 5.5.49 R to the extent that the representative or agent will hold client money on trust or otherwise on behalf of its clients.

Immediate segregation

CASS 5.5.19
14/01/2005
FCA
A firm must establish and maintain procedures to ensure that client money received by its appointed representatives, field representatives, or other agents of the firm is:
(1) paid into a client bank account of the firm in accordance with CASS 5.5.5 R; or
(2) forwarded to the firm, or in the case of a field representative forwarded to a specified business address of the firm, so as to ensure that the money arrives at the specified business address by the close of the third business day.
CASS 5.5.20
14/01/2005
FCA
For the purposes of CASS 5.5.19 R, the client money received on business day one should be forwarded to the firm or specified business address of the firm no later than the next business day after receipt (business day two) in order for it to reach that firm or specified business address by the close of the third business day. Procedures requiring the client money to be sent to the firm or the specified business address of the firm by first class post no later than the next business day after receipt would meet the requirements of CASS 5.5.19 R.
CASS 5.5.21
14/01/2005
FCA
If client money is received in accordance with CASS 5.5.19 R, the firm must ensure that its appointed representatives, field representatives or other agents keep client money (whether in the form of premiums, claims money or premium refunds) separately identifiable from any other money (including that of the firm) until the client money is paid into a client bank account or sent to the firm.
CASS 5.5.22
14/01/2005
FCA
A firm which acts in accordance with CASS 5.5.19 R to CASS 5.5.21 R need not comply with CASS 5.5.23 R.

Periodic segregation and reconciliation

CASS 5.5.23
14/01/2005
FCA
(1) A firm must, on a regular basis, and at reasonable intervals, ensure that it holds in its client bank account an amount which (in addition to any other amount which it is required by these rules to hold) is not less than the amount which it reasonably estimates to be the aggregate of the amounts held at any time by its appointed representatives, field representatives, and other agents.
(2) A firm must, not later than ten business days following the expiry of each period in (1):
(a) carry out, in relation to each such representative or agent, a reconciliation of the amount paid by the firm into its client bank account with the amount of client money actually received and held by the representative or other agent; and
(b) make a corresponding payment into, or withdrawal from, the account.
CASS 5.5.24
14/01/2005
FCA
(1) CASS 5.5.23 R allows a firm with appointed representatives, field representatives and other agents to avoid the need for the representative to forward client money on a daily basis but instead requires a firm to segregate into its client money bank account amounts which it reasonably estimates to be sufficient to cover the amount of client money which the firm expects its representatives or agents to receive and hold over a given period. At the expiry of each such period, the firm must obtain information about the actual amount of client money received and held by its representatives so that it can reconcile the amount of client money it has segregated with the amounts actually received and held by its representatives and agents. The frequency at which this reconciliation is to be performed is not prescribed but it must be at regular and reasonable intervals having regard to the nature and frequency of the insurance business carried on by its representatives and agents. For example, a period of six months might be appropriate for a representative which conducts business involving the receipt of premiums only infrequently whilst for other representatives a periodic reconciliation at monthly intervals (or less) may be appropriate.
(2) Where a firm operates on the basis of CASS 5.5.23 R, the money which is segregated into its client bank account is client money and will be available to meet any obligations owed to the clients of its representatives who for this purpose are treated as the firm'sclients.
CASS 5.5.25
14/01/2005
FCA
A firm which acts in accordance with CASS 5.5.23 R need not comply with CASS 5.5.19 R to CASS 5.5.21 R.

Client entitlements

CASS 5.5.26
14/01/2005
FCA
A firm must take reasonable steps to ensure that it is notified promptly of any receipt of client money in the form of client entitlements.
CASS 5.5.27
14/01/2005
FCA
The 'entitlements' mentioned in CASS 5.5.26 R refer to any kind of miscellaneous payment which the firm receives on behalf of a client and which are due to be paid to the client.
CASS 5.5.28
14/01/2005
FCA
When a firm receives a client entitlement on behalf of a client, it must pay any part of it which is client money:
(1) for client entitlements received in the United Kingdom, into a client bank account in accordance with CASS 5.5.5 R; or
(2) for client entitlements received outside the United Kingdom, into any bank account operated by the firm, provided that such client money is:
(a) paid to, or in accordance with, the instructions of the client concerned; or
(b) paid into a client bank account in accordance with CASS 5.5.5 R (1), as soon as possible but no later than five business days after the firm is notified of its receipt.
CASS 5.5.29
14/01/2005
FCA
A firm must take reasonable steps to ensure that a client entitlement which is client money is allocated within a reasonable period of time after notification of receipt.

Interest and investment returns

CASS 5.5.30
06/01/2008
FCA
(1) In relation to consumers, a firm must, subject to (2), take reasonable steps to ensure that its terms of business or other client agreements adequately explain, and where necessary obtain a client's informed consent to, the treatment of interest and, if applicable, investment returns, derived from its holding of client money and any segregated designated investments.
(2) In respect of interest earned on client bank accounts, (1) does not apply if a firm has reasonable ground to be satisfied that in relation to insurance mediation activities carried on with or for a consumer the amount of interest earned will be not more than £20 per transaction.
CASS 5.5.31
06/01/2008
FCA
If no interest is payable to a consumer, that fact should be separately identified in the firm's client agreement or terms of business.
CASS 5.5.32
14/01/2005
FCA
If a firm outlines its policy on its payment of interest, it need not necessarily disclose the actual rates prevailing at any particular time; the firm should disclose the terms, for example, LIBOR plus or minus 'x' percentage points.

Transfer of client money to a third party

CASS 5.5.33
14/01/2005
FCA
CASS 5.5.34 R sets out the requirements a firm must comply with when it transfers client money to another person without discharging its fiduciary duty owed to that client. Such circumstances arise when, for example, a firm passes client money to another broker for the purposes of the client's transaction being effected. A firm can only discharge itself from its fiduciary duty by acting in accordance with, and in the circumstances permitted by, CASS 5.5.80 R.
CASS 5.5.34
06/01/2008
FCA
A firm may allow another person, such as another broker to hold or control client money, but only if:
(1) the firm transfers the client money for the purpose of a transaction for a client through or with that person; and
(2) in the case of a consumer , that customer has been notified (whether through a client agreement, terms of business, or otherwise in writing) that the client money may be transferred to another person.
CASS 5.5.35
14/01/2005
FCA
In relation to the notification required by CASS 5.5.34 R (2), there is no need for a firm to make a separate disclosure in relation to each transfer made.
CASS 5.5.36
14/01/2005
FCA
A firm should not hold excess client money with another broker. It should be held in a client bank account.

Client bank accounts

CASS 5.5.37
01/04/2013
FCA
The FCA generally requires a firm to place client money in a client bank account with an approved bank. However, a firm which is an approved bank must not (subject to CASS 5.1.1 R (2)(e)) hold client money in an account with itself.
CASS 5.5.38
14/01/2005
FCA
(1)  A firm must ensure that client money is held in a client bank account at one or more approved banks.
(2)  If the firm is a bank, it must not hold client money in an account with itself.
CASS 5.5.39
14/01/2005
FCA
A firm may open one or more client bank accounts in the form of a designated client bank account. Characteristics of these accounts are that:
(1) the account holds money of one or more clients;
(2) the account includes in its title the word 'designated';
(3) the clients whose money is in the account have each consented in writing to the use of the bank with which the client money is to be held; and
(4) in the event of the failure of that bank, the account is not pooled with any other type of account unless a primary pooling event occurs.
CASS 5.5.40
14/01/2005
FCA
(1) A firm may operate as many client accounts as it wishes.
(2)  A firm is not obliged to offer its clients the facility of a designated client bank account.
(3) Where a firm holds money in a designated client bank account, the effect upon either:
(a) the failure of a bank where any other client bank account is held; or
(b) the failure of a third party to whom money has been transferred out of any other client bank account in accordance with CASS 5.5.34 R;
(each of which is a secondary pooling event) is that money held in the designated client bank account is not pooled with money held in any other account. Accordingly clients whose money is held in a designated client bank account will not share in any shortfall resulting from a failure of the type described in (a) or (b).
(4) Where a firm holds client money in a designated client bank account, the effect upon the failure of the firm (which is a primary pooling event ) is that money held in the designated client bank account is pooled with money in every other client bank account of the firm. Accordingly, clients whose money is held in a designated client bank account will share in any shortfall resulting from a failureof the firm.
CASS 5.5.41
06/01/2008
FCA
A firm may hold client money with a bank that is not an approved bank if all the following conditions are met:
(1) the client money relates to one or more insurance transactions which are subject to the law or market practice of a jurisdiction outside the United Kingdom;
(2) because of the applicable law or market practice of that overseas jurisdiction, it is not possible to hold the client money in a client bank account with an approved bank;
(3) the firm holds the money with such a bank for no longer than is necessary to effect the transactions;
(4) the firm notifies each relevant client and has, in relation to a consumer , a client agreement, or terms of business which adequately explain that:
(a) client money will not be held with an approved bank;
(b) in such circumstances, the legal and regulatory regime applying to the bank with which the client money is held will be different from that of the United Kingdom and, in the event of a failure of the bank, the client money may be treated differently from the treatment which would apply if the client money were held by an approved bank in the United Kingdom; and
(c) if it is the case, the particular bank has not accepted that it has no right of set-off or counterclaim against money held in a client bank account, in respect of any sum owed on any other account of the firm, notwithstanding the firm's request to the bank as required by CASS 5.5.49 R; and
(5) the client money is held in a designated bank account.

A firm's selection of a bank

CASS 5.5.42
14/01/2005
FCA
A firm owes a duty of care to a client when it decides where to place client money. The review required by CASS 5.5.43 R is intended to ensure that the risks inherent in placing client money with a bank are minimised or appropriately diversified by requiring a firm to consider carefully the bank or banks with which it chooses to place client money. For example, a firm which is likely only to hold relatively modest amounts of client money will be likely to be able to satisfy this requirement if it selects an authorised UK clearing bank.
CASS 5.5.43
14/01/2005
FCA
Before a firm opens a client bank account and as often as is appropriate on a continuing basis (and no less than once in each financial year), it must take reasonable steps to establish that the bank is appropriate for that purpose.
CASS 5.5.44
14/01/2005
FCA
A firm should consider diversifying placements of client money with more than one bank where the amounts are, for example, of sufficient size to warrant such diversification.
CASS 5.5.45
14/01/2005
FCA
When considering where to place client money and to determine the frequency of the appropriateness test under CASS 5.5.43 R, a firm should consider taking into account, together with any other relevant matters:
(1) the capital of the bank;
(2) the amount of client money placed, as a proportion of the bank's capital and deposits;
(3) the credit rating of the bank (if available); and
(4) to the extent that the information is available, the level of risk in the investment and loan activities undertaken by the bank and its affiliated companies.
CASS 5.5.46
14/01/2005
FCA
A firm will be expected to perform due diligence when opening a client bank account with a bank that is authorised by an EEA regulator. Any continuing assessment of that bank may be restricted to verification that it remains authorised by an EEA regulator.

Group banks

CASS 5.5.47
01/11/2007
FCA
Subject to CASS 5.5.41 R, a firm that holds or intends to hold client money with a bank which is in the same group as the firm must:
(1) undertake a continuous review in relation to that bank which is at least as rigorous as the review of any bank which is not in the same group, in order to ensure that the decision to use a group bank is appropriate for the client;
(2) disclose in writing to its client at the outset of the client relationship (whether by way of a client agreement, terms of business or otherwise in writing) or, if later, not less than 20 business days before it begins to hold client money of that client with that bank:
(a) that it is holding or intends to hold client money with a bank in the same group;
(b) the identity of the bank concerned; and
(c) that the client may choose not to have his money placed with such a bank.
CASS 5.5.48
14/01/2005
FCA
If a client has notified a firm in writing that he does not wish his money to be held with a bank in the same group as the firm, the firm must either:
(1) place that client money in a client bank account with another bank in accordance with CASS 5.5.38 R; or
(2) return that client money to, or pay it to the order of, the client.

Notification and acknowledgement of trust (banks)

CASS 5.5.49
14/01/2005
FCA
When a firm opens a client bank account, the firm must give or have given written notice to the bank requesting the bank to acknowledge to it in writing:
(1) that all money standing to the credit of the account is held by the firm as trustee (or if relevant in Scotland, as agent) and that the bank is not entitled to combine the account with any other account or to exercise any right of set-off or counterclaim against money in that account in respect of any sum owed to it on any other account of the firm; and
(2) that the title of the account sufficiently distinguishes that account from any account containing money that belongs to the firm, and is in the form requested by the firm.
CASS 5.5.50
14/01/2005
FCA
In the case of a client bank account in the United Kingdom, if the bank does not provide the acknowledgement referred to in CASS 5.5.49 R within 20 business days after the firm dispatched the notice, the firm must withdraw all money standing to the credit of the account and deposit it in a client bank account with another bank as soon as possible.
CASS 5.5.51
14/01/2005
FCA
In the case of a client bank account outside the United Kingdom, if the bank does not provide the acknowledgement referred to in CASS 5.5.49 R within 20 business days after the firm dispatched the notice, the firm must notify the client of this fact as set out in CASS 5.5.53 R.
CASS 5.5.52
14/01/2005
FCA
Firms are reminded of the provisions of CASS 5.5.41 R (4), which sets out the notification and consents required when using a bank that is not an approved bank.

Notification to clients: use of an approved bank outside the United Kingdom

CASS 5.5.53
06/01/2008
FCA
A firm must not hold, for a consumer, client money in a client bank account outside the United Kingdom, unless the firm has previously disclosed to the consumer (whether in its terms of business, client agreement or otherwise in writing):
(1) that his money may be deposited in a client bank account outside the United Kingdom but that the client may notify the firm that he does not wish his money to be held in a particular jurisdiction;
(2) that in such circumstances, the legal and regulatory regime applying to the approved bank will be different from that of the United Kingdom and, in the event of a failure of the bank, his money may be treated in a different manner from that which would apply if the client money were held by a bank in the United Kingdom; and
(3) if it is the case, that a particular bank has not accepted that it has no right of set-off or counterclaim against money held in a client bank account in respect of any sum owed on any other account of the firm, notwithstanding the firm's request to the bank as required by CASS 5.5.49 R.
CASS 5.5.54
14/01/2005
FCA
There is no need for a firm to make a separate disclosure under CASS 5.5.53 R (1) and CASS 5.5.53 R (2) in relation to each jurisdiction.
CASS 5.5.55
14/01/2005
FCA
Firms are reminded of the provisions of CASS 5.5.41 R (4), which sets out the notification and consents required when using a bank that is not an approved bank.
CASS 5.5.56
14/01/2005
FCA
If a client has notified a firm in writing before entering into a transaction that client money is not to be held in a particular jurisdiction, the firm must either:
(1) hold the client money in a client bank account in a jurisdiction to which the client has not objected; or
(2) return the client money to, or to the order of, the client.
CASS 5.5.57
14/01/2005
FCA
Firms are reminded of the provisions of CASS 5.5.41 R (4), which sets out the notification and consents required when using a bank that is not an approved bank.

Notification to consumers: use of broker or settlement agent outside the United Kingdom

CASS 5.5.58
06/01/2008
FCA
A firm must not undertake any transaction for a consumer that involves client money being passed to another broker or settlement agent located in a jurisdiction outside the United Kingdom, unless the firm has previously disclosed to the consumer (whether in its terms of business, client agreement or otherwise in writing):
(1) that his client money may be passed to a person outside the United Kingdom but the client may notify the firm that he does not wish his money to be passed to a money in a particular jurisdiction; and
(2) that, in such circumstances, the legal and regulatory regime applying to the broker or settlement agent will be different from that of the United Kingdom and, in the event of a failure of the broker or settlement agent, this money may be treated in a different manner from that which would apply if the money were held by a broker or settlement agent in the United Kingdom.
CASS 5.5.59
14/01/2005
FCA
There is no need for a firm to make a separate disclosure under CASS 5.5.58 R in relation to each jurisdiction.
CASS 5.5.60
14/01/2005
FCA
If a client has notified a firm before entering into a transaction that he does not wish his money to be passed to another broker or settlement agent located in a particular jurisdiction, the firm must either:
(1) hold the client money in a client bank account in the United Kingdom or a jurisdiction to which the money has not objected and pay its own money to the firm's own account with the broker, agent or counterparty; or
(2) return the money to, or to the order of, the client.

Notification to the FCA: failure of a bank, broker or settlement agent

CASS 5.5.61
01/04/2013
FCA
On the failure of a third party with which client money is held, a firm must notify the FCA:
(1) as soon as it becomes aware, of the failure of any bank, other broker or settlement agent or other entity with which it has placed, or to which it has passed, client money; and
(2) as soon as reasonably practical, whether it intends to make good any shortfall that has arisen or may arise and of the amounts involved.

Client money calculation and reconciliation

CASS 5.5.62
14/01/2005
FCA
(1)  In order that a firm may check that it has sufficient money segregated in its client bank account (and held by third parties) to meet its obligations to clients it is required periodically to calculate the amount which should be segregated (the client money requirement) and to compare this with the amount shown as its client money resource. This calculation is, in the first instance, based upon the firm's accounting records and is followed by a reconciliation with its banking records. A firm is required to make a payment into the client bank account if there is a shortfall or to remove any money which is not required to meet the firm's obligations.
(2)  For the purpose of calculating its client money requirement two alternative calculation methods are permitted, but a firm must use the same method in relation to CASS 5.3 and CASS 5.4. The first refers to individual client cash balances; the second to aggregate amounts of client money recorded on a firm business ledgers.
CASS 5.5.63
14/01/2005
FCA
(1) A firm must, as often as is necessary to ensure the accuracy of its records and at least at intervals of not more than 25 business days:
(a)  check whether its client money resource, as determined by CASS 5.5.65 R on the previous business day, was at least equal to the client money requirement, as determined by CASS 5.5.66 R or CASS 5.5.68 R, as at the close of business on that day; and
(b)  ensure that:
(i)  any shortfall is paid into a client bank account by the close of business on the day the calculation is performed; or
(ii)  any excess is withdrawn within the same time period unless CASS 5.5.9 R or CASS 5.5.10 R applies to the extent that the firm is satisfied on reasonable grounds that it is prudent to maintain a positive margin to ensure the calculation in (a) is satisfied having regard to any unreconciled items in its business ledgers as at the date on which the calculations are performed; and
(c)  include in any calculation of its client money requirement (whether calculated in accordance with CASS 5.5.66 R or CASS 5.5.68 R) any amounts attributable to client money received by its appointed representatives, field representatives or other agents and which, as at the date of calculation, it is required to segregate in accordance with CASS 5.5.19 R.
(2) A firm must within ten business days of the calculation in (a) reconcile the balance on each client bank account as recorded by the firm with the balance on that account as set out in the statement or other form of confirmation used by the bank with which that account is held.
(3) When any discrepancy arises as a result of the reconciliation carried out in (2), the firm must identify the reason for the discrepancy and correct it as soon as possible, unless the discrepancy arises solely as a result of timing differences between the accounting systems of the party providing the statement or confirmation and those of the firm.
(4)  While a firm is unable to resolve a difference arising from a reconciliation, and one record or a set of records examined by the firm during its reconciliation indicates that there is a need to have a greater amount of client money than is in fact the case, the firm must assume, until the matter is finally resolved, that the record or set of records is accurate and either pay its own money into a relevant account or make a withdrawal of any excess.
CASS 5.5.64
14/01/2005
FCA
A firm must keep a record of whether it calculates its client money requirement in accordance with CASS 5.5.66 R or CASS 5.5.68 R and may only use one method during each annual accounting period (which method must be the same in relation to both CASS 5.3 and CASS 5.4).

Client money resource

CASS 5.5.65
14/01/2005
FCA
The client money resource, for the purposes of CASS 5.5.63 R (1)(a), is:
(1) the aggregate of the balances on the firm's client money bank accounts, as at the close of business on the previous business day and, if held in accordance with CASS 5.4, designated investments (valued on a prudent and consistent basis) together with client money held by a third party in accordance with CASS 5.5.34 R; and
(2) (but only if the firm is comparing the client money resource with its client's money (accruals) requirement in accordance with CASS 5.5.68 R) to the extent that client money is held in accordance with CASS 5.3 (statutory trust), insurance debtors (which in this case cannot include pre-funded items); and
(3) (but only if the firm is comparing the client money resource with its client's money (accruals) requirement in accordance with CASS 5.5.68 R) to the extent that client money is held in accordance with CASS 5.4 (non-statutory trust):
(a) all insurance debtors (including pre-funded items whether in respect of advance premiums, claims, premium refunds or otherwise) shown in the firm's business ledgers as amounts due from clients, insurance undertakings and other persons, such debts valued on a prudent and consistent basis to the extent required to meet any shortfall of the client money resource compared with the firm's client money requirement; and
(b) the amount of any letter of credit or unconditional guarantee provided by an approved bank and held on the terms of the trust (or, in Scotland, agency), limited to:
(i) the maximum sum payable by the approved bank under the letter of credit or guarantee; or
(ii) if less, the amount which would, apart from the benefit of the letter of credit or guarantee, be the shortfall of the client money resource compared with the client money requirement under CASS 5.5.66 R or CASS 5.5.68 R.
But a firm may treat a transaction with an insurance undertaking which is not a UK domestic firm as complete, and accordingly may (but only for the purposes of the calculation in (1)) disregard any unreconciled items of client money transferred to an intermediate broker relating to such a transaction, if:
(4)  it has taken reasonable steps to ascertain whether the transaction is complete; and
(5)  it has no reason to consider the transaction has not been completed; and
(6)  a period of at least 12 months has elapsed since the money was transferred to the intermediate broker for the purpose of the transaction.

Client money (client balance) requirement

CASS 5.5.66
14/01/2005
FCA
A firm's client money (client balance) requirement is the sum of, for all clients, the individual client balances calculated in accordance with CASS 5.5.67 R but excluding any individual balances which are negative (that is, uncleared client funds).
CASS 5.5.67
14/01/2005
FCA
The individual client balance for each client must be calculated as follows:
(1) the amount paid by a client to the client (to include all premiums); plus
(2) the amount due to the client (to include all claims and premium refunds); plus
(3) the amount of any interest or investment returns due to the client;
(4) less the amount paid to insurance undertakings for the benefit of the client (to include all premiums and commission due to itself) (i.e. commissions that are due but have not yet been removed from the client account);
(5) less the amount paid by the firm to the client (to include all claims and premium refunds);
and where the individual client balance is found by the sum ((1) + (2) + (3)) - ((4) + (5)).

Client money (accruals) requirement

CASS 5.5.68
14/01/2005
FCA
A firm's client money (accruals) requirement is the sum of the following:
(1) all insurance creditors shown in the firm's business ledgers as amounts due to insurance undertakings, clients and other persons; plus
(2) unearned commission being the amount of commission shown as accrued (but not shown as due and payable) as at the date of the calculation (a prudent estimate must be used if the firm is unable to produce an exact figure at the date of the calculation).
CASS 5.5.69
14/01/2005
FCA
A firm which calculates its client money requirement on the preceding basis must in addition and within a reasonable period be able to match its client money resource to its requirement by reference to individual clients (with such matching being achieved for the majority of its clients and transactions).

[deleted]

CASS 5.5.70
14/01/2005
[deleted]
CASS 5.5.71
14/01/2005
[deleted]
CASS 5.5.72
14/01/2005
[deleted]

[deleted]

CASS 5.5.73
14/01/2005
[deleted]

[deleted]

CASS 5.5.74
14/01/2005
[deleted]
CASS 5.5.75
14/01/2005
[deleted]

Failure to perform calculations or reconciliation

CASS 5.5.76
01/04/2013
FCA
A firm must notify the FCA immediately if it is unable to, or does not, perform the calculation required by CASS 5.5.63 R (1).
CASS 5.5.77
01/04/2013
FCA
A firm must notify the FCA immediately it becomes aware that it may not be able to make good any shortfall identified by CASS 5.5.63 R (1) by the close of business on the day the calculation is performed and if applicable when the reconciliation is completed.
CASS 5.5.78
14/01/2005
[deleted]

Discharge of fiduciary duty

CASS 5.5.79
06/07/2006
FCA
The purpose of CASS 5.5.80 R to CASS 5.5.83 R is to set out those situations in which a firm will have fulfilled its contractual and fiduciary obligations in relation to any client money held for or on behalf of its client, or in relation to the firm's ability to require repayment of that money from a third party.
CASS 5.5.80
14/01/2005
FCA
Money ceases to be client money if it is paid:
(1) to the client, or a duly authorised representative of the client; or
(2) to a third party on the instruction of or with the specific consent of the client, but not if it is transferred to a third party in the course of effecting a transaction, in accordance with CASS 5.5.34 R; or
(3) into a bank account of the client (not being an account which is also in the name of the firm); or
(4) to the firm itself, when it is due and payable to the firm in accordance with CASS 5.1.5 R (1); or
(5) to the firm itself, when it is an excess in the client bank account as set out in CASS 5.5.63 R (1)(b)(ii).
CASS 5.5.81
14/01/2005
FCA
(1) A firm which pays professional fees (for example to a loss adjuster or valuer) on behalf of a client may do so in accordance with CASS 5.5.80 R (2) where this is done on the instruction of or with the consent of the client.
(2) When a firm wishes to transfer client money balances to a third party in the course of transferring its business to another firm, it should do so in compliance with CASS 5.5.80 R and a transferee firm will come under an obligation to treat any client money so transferred in accordance with these rules.
(3) Firms are reminded of their obligation, when transferring money to third parties in accordance with CASS 5.5.34 R, to use appropriate skill, care and judgment in their selection of third parties in order to ensure adequate protection of client money.
(4) Firms are reminded that, in order to calculate their client money resource in accordance with CASS 5.5.63 R to CASS 5.5.65 R, they will need to have systems in place to produce an accurate accounting record showing how much client money is being held by third parties at any point in time. For the purposes of CASS 5.5.63 R to CASS 5.5.65 R, however, a firm must assume that monies remain at an intermediate broker awaiting completion of the transaction unless it has received confirmation that the transaction has been completed.
CASS 5.5.82
14/01/2005
FCA
When a firm draws a cheque or other payable order to discharge its fiduciary duty under CASS 5.5.80 R, it must continue to treat the sum concerned as client money until the cheque or order is presented and paid by the bank.
CASS 5.5.83
14/01/2005
FCA
For the purposes of CASS 5.1.5 R, if a firm makes a payment to, or on the instructions of, a client, from an account other than a client bank account, until that payment has cleared, no equivalent sum will become due and payable to the firm or may be withdrawn from a client bank account by way of reimbursement.

Records

CASS 5.5.84
14/01/2005
FCA
A firm must ensure that proper records, sufficient to show and explain the firm's transactions and commitments in respect of its client money, are made and retained for a period of three years after they were made.

CASS 5.6 Client money distribution

Application

CASS 5.6.1
14/01/2005
FCA
(1) CASS 5.6 (the client money (insurance) distribution rules) applies to a firm that in holding client money is subject to CASS 5.3 (statutory trust) or CASS 5.4 (Non-statutory trust) when a primary pooling event or a secondary pooling event occurs.
(2) In the event of there being any discrepancy between the terms of the trust as required by CASS 5.4.7 R (1)(c) and the provisions of CASS 5.6, the latter shall apply.
CASS 5.6.2
14/01/2005
FCA
(1) The client money (insurance) distribution rules have force and effect on any firm that holds client money in accordance with CASS 5.3 or CASS 5.4. Therefore, they may apply to a UK branch of a non-EEA firm. In this case, the UK branch of the firm may be treated as if the branch itself is a free-standing entity subject to the client money (insurance) distribution rules.
(2) Firms that act in accordance with CASS 5.4 (Non-statutory trust) are reminded that the client money (insurance) distribution rules should be given effect in the terms of trust required by CASS 5.4.

Purpose

CASS 5.6.3
14/01/2005
FCA
The client money (insurance) distribution rules seek to facilitate the timely return of client money to a client in the event of the failure of a firm or third party at which the firm holds client money.

Failure of the authorised firm: primary pooling event

CASS 5.6.4
14/01/2005
FCA
A primary pooling event triggers a notional pooling of all the client money, in every type of client money account, and the obligation to distribute it.
CASS 5.6.5
01/04/2013
FCA
A primary pooling event occurs:
(1) on the failure of the firm; or
(2) on the vesting of assets in a trustee in accordance with an 'assets requirement' imposed under 55P(1)(b) or (c) (as the case may be) of the Act; or
(3) on the coming into force of a requirement for all client money held by the firm; or
(4) when the firm notifies, or is in breach of its duty to notify, the FCA, in accordance with CASS 5.5.77 R , that it is unable correctly to identify and allocate in its records all valid claims arising as a result of a secondary pooling event.
CASS 5.6.6
01/04/2013
FCA
CASS 5.6.5 R (4) does not apply so long as:
(1) the firm is taking steps, in consultation with the FCA, to establish those records; and
(2) there are reasonable grounds to conclude that the records will be capable of rectification within a reasonable period.

Pooling and distribution

CASS 5.6.7
14/01/2005
FCA
If a primary pooling event occurs:
(1) client money held in each client money account of the firm is treated as pooled;
(2) the firm must distribute that client money in accordance with CASS 5.3.2 R or, as appropriate, CASS 5.4.7 R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 5.5.66 R; and
(3) the firm must, as trustee, call in and make demand in respect of any debt due to the firm as trustee, and must liquidate any designated investment, and any letter of credit or guarantee upon which it relies for meeting any shortfall in its client money resource and the proceeds shall be pooled together with other client money as in (1) and distributed in accordance with (2).
CASS 5.6.8
14/01/2005
FCA
A client's main claim is for the return of client money held in a client bank account. A client may claim for any shortfall against money held in a firm's own account. For that claim, the client will be an unsecured creditor of the firm.

Client money received after the failure of the firm

CASS 5.6.9
06/07/2006
FCA
Client money received by the firm (including in its capacity as trustee under CASS 5.4 (Non-statutory trust)) after a primary pooling event must not be pooled with client money held in any client money account operated by the firm at the time of the primary pooling event. It must be placed in a client bank account that has been opened after that event and must be handled in accordance with the client money rules, and returned to the relevant client without delay, except to the extent that:
(1) it is client money relating to a transaction that has not completed at the time of the primary pooling event; or
(2) it is money relating to a client, for whom the client money requirement , calculated in accordance with CASS 5.5.66 R or CASS 5.5.68 R , shows that money is due from the client to the firm including in its capacity as trustee under CASS 5.4 (Non-statutory trust) at the time of the primary pooling event.
CASS 5.6.10
14/01/2005
FCA
Client money received after the primary pooling event relating to an incomplete transaction should be used to complete that transaction.
CASS 5.6.11
14/01/2005
FCA
If a firm receives a mixed remittance after a primary pooling event, it must:
(1) pay the full sum into the separate client bank account opened in accordance with CASS 5.6.9 R; and
(2) pay the money that is not client money out of that client bank account into the firm's own bank account within one business day of the day on which the remittance is cleared.
CASS 5.6.12
14/01/2005
FCA
Whenever possible the firm should seek to split a mixed remittance before the relevant accounts are credited.

Failure of a bank, other broker or settlement agent: secondary pooling events

CASS 5.6.13
14/01/2005
FCA
If both a primary pooling event and a secondary pooling event occur, the provisions of this section relating to a primary pooling event apply.
CASS 5.6.14
14/01/2005
FCA
A secondary pooling event occurs on the failure of a third party to which client money held by the firm has been transferred under CASS 5.5.34 R.
CASS 5.6.15
14/01/2005
FCA
CASS 5.6.20 R to CASS 5.6.31 R do not apply if, on the failure of the third party, the firm repays to its clients or pays into a client bank account, at an unaffected bank, an amount equal to the amount of client money which would have been held if a shortfall had not occurred at that third party.
CASS 5.6.16
14/01/2005
FCA
When client money is transferred to a third party, a firm continues to owe a fiduciary duty to the client. However, consistent with a fiduciary's responsibility (whether as agent or trustee) for third parties under general law, a firm will not be held responsible for a shortfall in client money caused by a third party failure if it has complied with those duties.
CASS 5.6.17
14/01/2005
FCA
To comply with its duties, the firm should show proper care:
(1) in the selection of a third party; and
(2) when monitoring the performance of the third party.
In the case of client money transferred to a bank, by demonstrating compliance with CASS 5.5.43 R, a firm should be able to demonstrate that it has taken reasonable steps to comply with its duties.

Failure of a bank

CASS 5.6.18
14/01/2005
FCA
When a bank fails and the firm decides not to make good the shortfall in the amount of client money held at that bank, a secondary pooling event will occur in accordance with CASS 5.6.20 R. The firm would be expected to reflect the shortfall that arises at the firm's bank in the periodic client money calculation by reducing the client money resource and client money requirement accordingly.
CASS 5.6.19
14/01/2005
FCA
The client money (insurance) distribution rules seek to ensure that clients who have previously specified that they are not willing to accept the risk of the bank that has fails, and who therefore requested that their client money be placed in a designated client bank account as a different bank, should not suffer the loss of the bank that has failed.

Failure of a bank: pooling

CASS 5.6.20
14/01/2005
FCA
If a secondary pooling event occurs as a result of the failure of a bank where one or more general client bank accounts are held, then:
(1) in relation to every general client bank account of the firm, the provisions of CASS 5.6.22 R and CASS 5.6.26 R to CASS 5.6.28 G will apply;
(2) in relation to every designated client bank account held by the firm with the failed bank, the provisions of CASS 5.6.24 R and CASS 5.6.26 R to CASS 5.6.28 G will apply; and
(3) any money held at a bank, other than the bank that has failed, in designated client bank accounts is not pooled with any other client money.
CASS 5.6.21
14/01/2005
FCA
If a secondary pooling event occurs as a result of the failure of a bank where one or more designated client bank accounts are held then in relation to every designated client bank account held by the firm with the failed bank, the provisions of CASS 5.6.24 R and CASS 5.6.26 R to CASS 5.6.28 G will apply.
CASS 5.6.22
14/01/2005
FCA
Money held in each general client bank account of the firm must be treated as pooled and:
(1) any shortfall in client money held, or which should have been held, in general client bank accounts, that has arisen as a result of the failure of the bank, must be borne by all the clients whose client money is held in a general client bank account of the firm, rateably in accordance with their entitlements;
(2) a new client money entitlement must be calculated for each client by the firm, to reflect the requirements in (1), and the firm's records must be amended to reflect the reduced client money entitlement;
(3) the firm must make and retain a record of each client's share of the client money shortfall at the failed bank until the client is repaid; and
(4) the firm must use the new client entitlements, calculated in accordance with (2), when performing the client money calculation in accordance with CASS 5.5.63 R to CASS 5.5.69 R.
CASS 5.6.23
14/01/2005
FCA
The term 'which should have been held' is a reference to the failed bank's failure (and elsewhere, as appropriate, is a reference to the other failed third party's failure) to hold the client money at the time of the pooling event.
CASS 5.6.24
14/01/2005
FCA
For each client with a designated client bank account held at the failed bank:
(1) any shortfall in client money held, or which should have been held, in designated client bank accounts that has arisen as a result of the failure, must be borne by all the clients whose client money is held in a designated client bank account of the firm at the failed bank, rateably in accordance with their entitlements;
(2) a new client money entitlement must be calculated for each of the relevant clients by the firm, and the firm's records must be amended to reflect the reduced client money entitlement;
(3) the firm must make and retain a record of each client's share of the client money shortfall at the failed bank until the client is repaid; and
(4) the firm must use the new client money entitlements, calculated in accordance with (2), when performing the periodic client money calculation, in accordance with CASS 5.5.63 R to CASS 5.5.69 R.
CASS 5.6.25
14/01/2005
FCA
A client whose money was held, or which should have been held, in a designated client bank account with a bank that has failed is not entitled to claim in respect of that money against any other client bank account or client transaction account of the firm.

Client money received after the failure of a bank

CASS 5.6.26
14/01/2005
FCA
Client money received by the firm after the failure of a bank, that would otherwise have been paid into a client bank account at that bank:
(1) must not be transferred to the failed bank unless specifically instructed by the client in order to settle an obligation of that client to the failed bank; and
(2) must be, subject to (1), placed in a separate client bank account that has been opened after the secondary pooling event and either:
(a) on the written instruction of the client, transferred to a bank other than the one that has failed; or
(b) returned to the client as soon as possible.
CASS 5.6.27
14/01/2005
FCA
If a firm receives a mixed remittance after the secondary pooling event which consists of client money that would have been paid into a general client bank account, a designated client bank account or a designated client fund account maintained at the bank that has failed, it must:
(1) pay the full sum into a client bank account other than one operated at the bank that has failed; and
(2) pay the money that is not client money out of that client bank account within one business day of the day on which the remittance is cleared.
CASS 5.6.28
14/01/2005
FCA
Whenever possible the firm should seek to split a mixed remittance before the relevant accounts are credited.

Failure of an intermediate broker or settlement agent: pooling

CASS 5.6.29
14/01/2005
FCA
If a secondary pooling event occurs as a result of the failure of another broker or settlement agent to whom the firm has transferred client's money then, in relation to every general client bank account of the firm, the provisions of CASS 5.6.26 R to CASS 5.6.28 G and CASS 5.6.30 R will apply.
CASS 5.6.30
14/01/2005
FCA
Money held in each general client bank account of the firm must be treated as pooled and:
(1) any shortfall in client money held, or which should have been held, in general client bank accounts, that has arisen as a result of the failure, must be borne by all the clients whose client money is held in a general client bank account of the firm, rateably in accordance with their entitlements;
(2) a new client money entitlement must be calculated for each client by the firm, to reflect the requirements of (1), and the firm's records must be amended to reflect the reduced client money entitlement;
(3) the firm must make and retain a record of each client's share of the client money shortfall at the failed intermediate broker or settlement agent until the client is repaid; and
(4) the firm must use the new client money entitlements, calculated in accordance with (2), when performing the periodic client money calculation, in accordance with CASS 5.5.63 R to CASS 5.5.69 R.

Client money received after the failure of a broker or settlement agent

CASS 5.6.31
14/01/2005
FCA
Client money received by the firm after the failure of another broker or settlement agent, to whom the firm has transferred client money that would otherwise have been paid into a client bank account at that broker or settlement agent:
(1) must not be transferred to the failed thirty party unless specifically instructed by the client in order to settle an obligation of that client to the failed broker or settlement agent; and
(2) must be, subject to (1), placed in a separate client bank account that has been opened after the secondary pooling event and either:
(a) on the written instruction of the client, transferred to a third party other than the one that has failed; or
(b) returned to the client as soon as possible.

Notification on the failure of a bank, other broker or settlement agent

CASS 5.6.32
14/01/2005
FCA
The provisions of CASS 5.5.61 R apply.

CASS 5.7 Mandates

CASS 5.7.1
01/11/2007
[deleted]
CASS 5.7.2
01/11/2007
[deleted]
CASS 5.7.3
01/11/2007
[deleted]
CASS 5.7.4
01/11/2007
[deleted]
CASS 5.7.5
01/11/2007
[deleted]
CASS 5.7.6
01/11/2007
[deleted]

CASS 5.8 Safe keeping of client's documents and other assets

Application

CASS 5.8.1
06/04/2010
FCA
(1) CASS 5.8 applies to a firm (including in its capacity as trustee under CASS 5.4) which in the course of insurance mediation activity takes into its possession for safekeeping any client title documents (other than documents of no value) or other tangible assets belonging to clients.
(2) CASS 5.8 does not apply to a firm when:
(a) carrying on an insurance mediation activity which is in respect of a reinsurance contract; or
(b) acting in accordance with CASS 6 (Custody rules).

Purpose

CASS 5.8.2
14/01/2005
FCA
The rules in this section amplify the obligation in Principle 10 which requires a firm to arrange adequate protection for client's assets. Firms carrying on insurance mediation activities may hold, on a temporary or longer basis, client title documents such as policy documents (other than policy documents of no value) and also items of physical property if, for example, a firm arranges for a valuation. The rules are intended to ensure that firms make adequate arrangements for the safe keeping of such property.

Requirement

CASS 5.8.3
14/01/2005
FCA
(1) A firm which has in its possession or control documents evidencing a client's title to a contract of insurance or other similar documents (other than documents of no value) or which takes into its possession or control tangible assets belonging to a client, must take reasonable steps to ensure that any such documents or items of property:
(a) are kept safe until they are delivered to the client;
(b) are not delivered or given to any other person except in accordance with instructions given by the client; and that
a record is kept as to the identity of any such documents or items of property and the dates on which they were received by the firm and delivered to the client or other person.
(2) A firm must retain the record required in (1) for a period of three years after the document or property concerned is delivered to the client or other person.

CASS 5 Annex 1 Segregation of designated investments: permitted investments, general principles and conditions (This Annex belongs to CASS 5.5.14 R)

14/01/2005
FCA

1 The general principles which must be followed when client money segregation includes designated investments:
(a) there must be a suitable spread of investments;
(b) investments must be made in accordance with an appropriate liquidity strategy;
(c) the investments must be in accordance with an appropriate credit risk policy;
(d) any foreign exchange risks must be prudently managed.


2 Table of permitted designated investments for the purpose of CASS 5.5.14 R (1).
Investment type Qualification
1. Negotiable debt security (including a certificate of deposit) (a) Remaining term to maturity of 5 years or less; and
(b) The issuer or investment must have a short-term credit rating of A1 by Standard and Poor's, or P1 by Moody's Investor Services, or F1 by Fitch if the instrument has a remaining term to maturity of 366 days or less; or a minimum long term credit rating of AA- by Standards and Poor's, or Aa3 by Moody's Investor Services or AA- by Fitch if the instrument has a term to maturity of more than 366 days.
2. A repo in relation to negotiable debt security As for 1 above and where the credit rating of the counterparty also meets the criteria in 1.
3. Bond funds (a) An authorised fund or a recognised scheme or an investment company which is registered by the Securities and Exchange Commission of the United States of America under the Investment Company Act 1940;
(b) A minimum credit rating and risk rating of Aaf and S2 respectively by Standard and Poor's or Aa and MR2 respectively by Moody's Investor Services or AA and V2 respectively by Fitch.
4. Money market fund (a) An authorised fund or a recognised scheme;
(b) A minimum credit and risk rating of Aaa and MR1+ respectively by Moody's Investor Services or AAAm by Standard and Poor's or AAA and V1+ respectively by Fitch.
5. Derivatives Only for the purpose of prudently managing foreign currency risks.


3 The general conditions which must be satisfied in the segregation of designated investments are:
(a) any redemption of an investment must be by payment into the firm's client money bank account;
(b) where the credit or risk rating of a designated investment falls below the minimum set out in the Table, the firm must dispose of the investment as soon as possible and in any event not later than 20 business days following the downgrade;
(c) where any investment or issuer has more than one rating, the lowest shall apply.

CASS 6.1 Application

CASS 6.1.1
01/07/2014
FCA
This chapter (the custody rules) applies to a firm:
(1) [deleted]
(a) [deleted]
(b) [deleted]
(1A) when it holds financial instruments belonging to a client in the course of its MiFID business;
(1B) when it is safeguarding and administering investments, in the course of business that is not MiFID business;
(1C) when it is acting as trustee or depositary of an AIF;
(1D) when it is acting as trustee or depositary of a UCITS; and
(1E) in respect of any arrangement for a client to transfer full ownership of a safe custody asset to the firm which is:
(a) in the course of, or in connection with, the firm's designated investment business; and
(b) for the purpose of securing or otherwise covering present or future, actual or contingent or prospective obligations,
but the application of the custody rules to a firm under this paragraph is limited to the rules and guidance in CASS 6.1.6 R to CASS 6.1.9 G.
(2) [deleted]
CASS 6.1.1A
06/04/2010
FCA
The regulated activity of safeguarding and administering investments covers both the safeguarding and administration of assets (without arranging) andarranging safeguarding and administration of assets, when those assets are either safe custody investments or custody assets. A safe custody investment is, in summary, a designated investment which a firm receives or holds on behalf of a client. Custody assets include designated investments, and any other assets that the firm holds or may hold in the same portfolio as a designated investment held for or on behalf of a client.
CASS 6.1.1B
22/07/2013
FCA
Firms to which the custody rules apply by virtue of CASS 6.1.1R (1B), (1C) or (1D) must also apply the custody rules to those custody assets which are not safe custody investments in a manner appropriate to the nature and value of those custody assets.
CASS 6.1.1C
01/01/2009
FCA
In accordance with article 42 of the Regulated Activities Order, a firm ("I") will not be arranging safeguarding and administration of assets if it introduces a client to another firm whose permitted activities include the safeguarding and administration of investments, or to an exempt person acting as such, with a view to that other firm or exempt person:
(1) providing a safe custody service in the United Kingdom; or
(2) arranging for the provision of a safe custody service in the United Kingdom by another person;
and the other firm, exempt person or other person who is to provide the safe custody service is not in the same group as I, and does not remunerate I.
CASS 6.1.2
01/01/2009
FCA
Firms are reminded that dividends (actual or payments in lieu), stock lending fees and other payments received for the benefit of a client, and which are due to the clients, should be held in accordance with the client money chapter where appropriate.
CASS 6.1.3
01/01/2009
[deleted]

Business in the name of the firm

CASS 6.1.4
01/11/2007
FCA
The custody rules do not apply where a firm carries on business in its name but on behalf of the client where that is required by the very nature of the transaction and the client is in agreement.
[Note: recital 26 to MiFID]
CASS 6.1.5
01/01/2009
FCA
For example, this chapter does not apply where a firm borrows safe custody assets from a client as principal under a stock lending agreement.

Title transfer collateral arrangements

CASS 6.1.6
01/10/2011
FCA
(1) The custody rules do not apply where a client transfers full ownership of a safe custody asset to a firm for the purpose of securing or otherwise covering present or future, actual, contingent or prospective obligations.
[Note: recital 27 to MiFID]
(2) Excepted from (1) is a transfer of the full ownership of a safe custody asset:
(a) belonging to a retail client;
(b) whose purpose is to secure or otherwise cover that client's present or future, actual, contingent or prospective obligations under a contract for differences or a rolling spot forex contract that is a future, and in either case where that contract is entered into with a firm acting as market maker; and
(c) which is made to that firm or to any other person arranging on its behalf.
CASS 6.1.6A
01/10/2011
FCA
(1) Subject to (2), where a firm makes arrangements for the purpose of securing or otherwise covering present or future, actual, contingent or prospective obligations of a retail client those arrangements must not provide for the taking of a transfer of full ownership of any of that client's safe custody assets.
(2) The application of (1) is confined to the taking of a transfer of full ownership:
(a) whose purpose is to secure or otherwise cover that retail client's obligations under a contract for differences ora rolling spot forex contract that is a future, and in either case where that contract is entered into with a firm acting as market maker; and
(b) which is made to that firm or to any other person arranging on its behalf.
CASS 6.1.7
01/11/2007
FCA
A title transfer financial collateral arrangement under the Financial Collateral Directive is a type of transfer of instruments to cover obligations where the financial instrument will not be regarded as belonging to the client.
CASS 6.1.8
01/11/2007
FCA
Firms are reminded of the client's best interests rule, which requires them to act honestly, fairly and professionally in accordance with the best interests of their clients when structuring their business particularly in respect of the effect of that structure on firms' obligations under this chapter.
CASS 6.1.9
01/11/2007
FCA
Firms are reminded that, in certain cases, the collateral rules apply where a firm receives collateral from a client in order to secure the obligations of the client.

Prime brokerage agreements

CASS 6.1.9A
01/03/2011
FCA
A prime brokerage firm is reminded of the additional obligations in CASS 9.3.1 R which apply to prime brokerage agreements.

Affiliated companies - MiFID business

CASS 6.1.10
01/01/2009
FCA
The fact that a client is an affiliated company in respect of MiFID business does not affect the operation of the custody rules in relation to that client.

Affiliated companies - non-MiFID business

CASS 6.1.10A
01/07/2014
[deleted]
CASS 6.1.10B
01/07/2014
FCA
In respect of a firm's business falling under CASS 6.1.1 R (1B), the custody rules do not apply to the firm when it is safeguarding and administering investments on behalf of an affiliated company, unless:
(1) the firm has been notified that the designated investment belongs to a client of the affiliated company; or
(2) the affiliated company is a client dealt with at arm's length.
CASS 6.1.11
01/01/2009
[deleted]

Delivery versus payment transactions

CASS 6.1.12
01/01/2009
FCA
(1) A firm need not treat this chapter as applying in respect of a delivery versus payment transaction through a commercial settlement system if it is intended that the safe custody asset is either to be:
(a) in respect of a client's purchase, due to the client within one business day following the client's fulfilment of a payment obligation; or
(b) in respect of a client's sale, due to the firm within one business day following the fulfilment of a payment obligation;
unless the delivery or payment by the firm does not occur by the close of business on the third business day following the date of payment or delivery of the safe custody asset by the client.
(2) Until such a delivery versus payment transaction through a commercial settlement system settles, a firm may segregate money (in accordance with the client money chapter) instead of the client's safe custody assets.
CASS 6.1.13
01/01/2009
[deleted]
CASS 6.1.14
01/01/2009
[deleted]

Temporary handling of safe custody assets

CASS 6.1.15
01/01/2009
FCA
The custody rules do not apply if a firm temporarily handles a safe custody asset belonging to a client. A firm should temporarily handle a safe custody asset for no longer than is reasonably necessary. In most transactions this would be no longer than one business day, but it may be longer or shorter depending upon the transaction in question. For example, when a firm executes an order to sell shares which have not been registered on a de-materialised exchange, handling documents for longer periods may be reasonably necessary. However, in the case of safe custody assets in bearer form, the firm is expected to handle them for less than one business day. When a firm temporarily handles safe custody assets, it is still obliged to comply with Principle 10 (Clients' assets).
CASS 6.1.16
01/01/2009
FCA
When a firm temporarily handles a safe custody asset, in order to comply with its obligation to act in accordance with Principle 10 (Clients' assets), the following are guides to good practice:
(1) a firm should keep the safe custody asset secure, record it as belonging to that client, and forward it to the client or in accordance with the client's instructions as soon as practicable after receiving it; and
(2) a firm should make and retain a record of the fact that the firm has handled that safe custody asset and of the details of the client concerned and of any action the firm has taken.

Exemptions which do not apply to MiFID business

CASS 6.1.16A
01/01/2009
FCA
The exemptions in CASS 6.1.16B R to CASS 6.1.16D G do not apply to a MiFID investment firm which holds financial instruments belonging to a client in the course of MiFID business.
CASS 6.1.16B
22/07/2014
FCA
[deleted]

Managers of AIFs and UCITS

CASS 6.1.16BA
22/07/2013
FCA
The custody rules do not apply to a firm that is managing an AIF or managing a UCITS in relation to activities which are carried on by that firm in connection with, or for the purposes of, managing the AIF or UCITS.

Personal investment firms

CASS 6.1.16C
01/01/2009
FCA
The custody rules do not apply to a personal investment firm when it temporarily holds a designated investment, other than in bearer form, belonging to a client, if the firm:
(1) keeps it secure, records it as belonging to that client, and forwards it to the client or in accordance with the client's instructions, as soon as practicable after receiving it;
(2) retains the designated investment for no longer than the firm has taken reasonable steps to determine is necessary to check for errors and to receive the final document in connection with any series of transactions to which the documents relate; and
(3) makes a record, which must then be retained for a period of 5 years after the record is made, of all the designated investments handled in accordance with (1) and (2) together with the details of the clients concerned and of any action the firm has taken.
CASS 6.1.16D
01/01/2009
FCA
Administrative convenience alone should not lead a personal investment firm to rely on CASS 6.1.16C R. Personal investment firms should consider what is in the client's interest and not rely on CASS 6.1.16C R as a matter of course.

Trustees and depositaries (except depositaries of AIFs)

CASS 6.1.16E
01/01/2009
FCA
The specialist regime in CASS 6.1.16F R to CASS 6.1.16I G does not apply to a MiFID investment firm which holds financial instruments belonging to a client in the course of MiFID business.
CASS 6.1.16F
01/07/2014
FCA
When a trustee firm or depositary acts as a custodian for a trust or collective investment scheme, (except for a firm acting as trustee or depositary of an AIF), and:
(1) the trust or scheme is established by written instrument; and
(2) the trustee firm or depositary has taken reasonable steps to determine that the relevant law and provisions of the trust instrument or scheme constitution will provide protections at least equivalent to the custody rules for the trust property or scheme property;
the trustee firm or depositary need comply only with the custody rules listed in the table below.
ReferenceRule
CASS 6.1.1 R to CASS 6.1.9 G and CASS 6.1.15 G to CASS 6.1.16C RApplication
CASS 6.1.16E R to CASS 6.1.16I GTrustees and depositaries
CASS 6.1.22 G to CASS 6.1.24 GGeneral purpose
CASS 6.2.1 R and CASS 6.2.2 RProtection of clients' safe custody assets
CASS 6.2.3 R and CASS 6.2.6 GRegistration and recording
CASS 6.2.7 RHolding
CASS 6.3.1 R to CASS 6.3.4 RDepositing safe custody assets with third parties
CASS 6.4.1 R and CASS 6.4.2 GUse of safe custody assets
CASS 6.5.Records, accounts and reconciliations

CASS 6.1.16G
01/01/2009
FCA
The reasonable steps referred in CASS 6.1.16FR (2) could include obtaining an appropriate legal opinion to that effect.
CASS 6.1.16H
01/07/2014
[deleted]
CASS 6.1.16I
01/01/2009
FCA
A trustee firm or depositary that just arranges safeguarding and administration of assets may also take advantage of the exemption in CASS 6.1.16J R (Arrangers).

Depositaries of AIFs

CASS 6.1.16IA
01/10/2013
FCA
(1) Subject to (2), when a firm is acting as trustee or depositary of an AIF the firm need comply only with the custody rules in the table below:
ReferenceRule
CASS 6.1.1 R, CASS 6.1.9 G, CASS 6.1.9A G and CASS 6.1.16IB GApplication
CASS 6.1.22 G to CASS 6.1.24 GGeneral purpose
CASS 6.2.3 R and CASS 6.2.4 R to CASS 6.2.6 GRegistration and recording
CASS 6.2.7 RHolding
CASS 6.3.1R (1A) and CASS 6.3.1R (4)Arranging registration
CASS 6.5.1 R, CASS 6.5.2A R, CASS 6.5.3 R, CASS 6.5.13R (1A) and CASS 6.5.14 GRecords, accounts and reconciliations

(2) When a firm is acting as trustee or depositary of an AIF that is an authorised AIF the firm must, in addition to the custody rules in (1), also comply with the custody rules in the table below:
ReferenceRule
CASS 6.1.1B RApplication
CASS 6.5.4 G (1A) to CASS 6.5.4 G (4), CASS 6.5.5 R, CASS 6.5.7A G,CASS 6.5.8A G, CASS 6.5.9 G and CASS 6.5.15 GRecords, accounts and reconciliations

CASS 6.1.16IB
22/07/2013
FCA
Firms acting as trustee or depositary of an AIF are reminded of the obligations in FUND 3.11 (Depositaries) and Chapter IV (Depositary) of the AIFMD level 2 regulation which apply in addition to those in CASS 6.
CASS 6.1.16IC
01/07/2014
FCA
A firm (Firm A) to which another firm acting as trustee or depositary of an AIF (Firm B) has delegated safekeeping functions in accordance with FUND 3.11.28 R (Delegation: safekeeping) will not itself be acting as trustee or depositary of an AIF for that AIF. CASS 6.1.16IA R will not apply to Firm A in respect of that AIF. However, Firm A may be safeguarding and administering investments in respect of that AIF.

Arrangers

CASS 6.1.16J
01/07/2014
FCA
Only the custody rules in the table below apply to a firm when arranging safeguarding and administration of assets.
ReferenceRule
CASS 6.1.1 R to CASS 6.1.9 G and CASS 6.1.15 G to CASS 6.1.16B RApplication
CASS 6.1.16J RArrangers
CASS 6.1.16K RRecords
CASS 6.1.22 G to CASS 6.1.24 GGeneral purpose
CASS 6.3.1 R (1A) and CASS 6.3.2 GArranging for assets to be deposited with third parties

CASS 6.1.16K
01/07/2014
FCA
When a firm arranges safeguarding and administration of assets, it must ensure that proper records of the arrangements are made and retained for a period of 5 years after they are made.
CASS 6.1.17
01/01/2009
(1) [deleted]
(1A) [deleted]
(2) [deleted]
(3) [deleted]
CASS 6.1.18
01/01/2009
[deleted]
CASS 6.1.19
01/01/2009
[deleted]
CASS 6.1.20
01/01/2009
[deleted]
CASS 6.1.20A
01/01/2009
[deleted]
CASS 6.1.21
01/01/2009
[deleted]

General purpose

CASS 6.1.22
01/01/2009
FCA
Principle 10 (Clients' assets) requires a firm to arrange adequate protection for clients' assets when it is responsible for them. As part of these protections, the custody rules require a firm to take appropriate steps to protect safe custody assets for which it is responsible.
CASS 6.1.23
01/01/2009
FCA
The rules in this chapter are designed primarily to restrict the commingling of client and the firm's assets and minimise the risk of the client's safe custody assets being used by the firm without the client's agreement or contrary to the client's wishes, or being treated as the firm's assets in the event of its insolvency.
CASS 6.1.24
01/01/2009
FCA
The custody rules also, where relevant, implement the provisions of MiFID which regulate the obligations of a firm when it holds financial instruments belonging to a client in the course of its MiFID business.

CASS 6.2 Holding of client assets

Requirement to protect clients' safe custody assets

CASS 6.2.1
01/01/2009
FCA
A firm must, when holding safe custody assets belonging to clients, make adequate arrangements so as to safeguard clients' ownership rights, especially in the event of the firm's insolvency, and to prevent the use of safe custody assets belonging to a client on the firm's own account except with the client's express consent.

[Note: article 13(7) of MiFID]

Requirement to have adequate organisational arrangements

CASS 6.2.2
01/01/2009
FCA
A firm must introduce adequate organisational arrangements to minimise the risk of the loss or diminution of clients' safe custody assets, or the rights in connection with those safe custody assets, as a result of the misuse of the safe custody assets, fraud, poor administration, inadequate record-keeping or negligence.

[Note: article 16(1)(f) of the MiFID implementing Directive]

Registration and recording of legal title

CASS 6.2.3
01/03/2014
FCA
To the extent practicable, a firm must effect appropriate registration or recording of legal title to a safe custody asset in the name of:
(1) the client (or, where appropriate, the trustee firm), unless the client is an authorised person acting on behalf of its client, in which case it may be registered in the name of the client of that authorised person;
(2) a nominee company which is controlled by:
(a) the firm;
(b) an affiliated company;
(c) a recognised investment exchange; or
(d) a third party with whom financial instruments are deposited under CASS 6.3 (Depositing assets and arranging for assets to be deposited with third parties);
(3) any other third party if:
(a) the safe custody asset is subject to the law or market practice of a jurisdiction outside the United Kingdom and the firm has taken reasonable steps to determine that it is in the client's best interests to register or record it in that way, or that it is not feasible to do otherwise, because of the nature of the applicable law or market practice; and
(b) the firm has notified the client in writing;
(4) the firm if:
(a) the safe custody asset is subject to the law or market practice of a jurisdiction outside the United Kingdom and the firm has taken reasonable steps to determine that it is in the client's best interests to register or record it in that way, or that it is not feasible to do otherwise, because of the nature of the applicable law or market practice; and
(b) the firm has notified the client if a professional client, or obtained prior written consent if a retail client.
CASS 6.2.3A
27/07/2012
FCA
If:
(1) the safe custody asset is an emission auction product that is a financial instrument; and
(2) it is not practicable or possible for a firm to effect registration or recording of legal title in this asset in the manner set out in CASS 6.2.3 R,
the firm must register or record legal title in its name provided it has notified the client in writing.
CASS 6.2.4
01/11/2007
FCA
A firm must accept the same level of responsibility to its client for any nominee company controlled by the firm with respect of any requirements of the custody rules.
CASS 6.2.5
01/01/2009
FCA
A firm may register or record legal title to its own applicable assets in the same name as that in which legal title to a safe custody asset is registered or recorded, but only if:
(1) the firm's applicable assets are separately identified in the firm's records from the safe custody assets; or
(2) the firm registers or records a safe custody asset in accordance with CASS 6.2.3 R (4).
CASS 6.2.6
01/11/2007
FCA
A firm when complying with CASS 6.2.3 R (3) or CASS 6.2.3 R (4) will be expected to demonstrate that adequate investigations have been made of the market concerned by reference to local sources, which may include an appropriate legal opinion.
CASS 6.2.7
01/01/2009
FCA
A firm must ensure that any documents of title to applicable assets in bearer form, belonging to the firm and which it holds in its physical possession, are kept separately from any document of title to a client's safe custody assets in bearer form.

CASS 6.3 Depositing assets and arranging for assets to be deposited with third parties

CASS 6.3.1
01/01/2009
FCA
(1) A firm may deposit safe custody assets held by it on behalf of its clients into an account or accounts opened with a third party, but only if it exercises all due skill, care and diligence in the selection, appointment and periodic review of the third party and of the arrangements for the holding and safekeeping of those safe custody assets.
(1A) A firm which arranges the registration of a safe custody investment through a third party must exercise all due skill, care and diligence in the selection and appointment of the third party.
(2) A firm must take the necessary steps to ensure that any client's safe custody assets deposited with a third party, in accordance with this rule are identifiable separately from the applicable assets belonging to the firm and from the applicable assets belonging to that third party, by means of differently titled accounts on the books of the third party or other equivalent measures that achieve the same level of protection.
(3) When a firm makes the selection, appointment and conducts the periodic review referred to under this rule, it must take into account:
(a) the expertise and market reputation of the third party; and
(b) any legal requirements or market practices related to the holding of those safe custody assets that could adversely affect clients' rights.
(4) A firm must make a record of the grounds upon which it satisfies itself as to the appropriateness of its selection of a third party as required in this rule. The firm must make the record on the date it makes the selection and must keep it from the date of such selection until five years after the firm ceases to use the third party to hold safe custody assets belonging to clients.

[Note: articles 16(1)(d) and 17(1) of the MiFID implementing Directive]
CASS 6.3.2
01/01/2009
FCA
In discharging its obligations under this section, a firm should also consider, together with any other relevant matters:
(1) once a safe custody asset has been lodged by the firm with the third party, the third party's performance of its services to the firm;
(2) the arrangements that the third party has in place for holding and safeguarding the safe custody asset;
(3) current industry standard reports, for example Financial Reporting and Auditing Group (FRAG) 21 report or its equivalent;
(4) the capital or financial resources of the third party;
(5) the credit rating of the third party; and and
(6) any other activities undertaken by the third party and, if relevant, any affiliated company.
CASS 6.3.3
01/04/2012
FCA
A firm should consider carefully the terms of its agreements with third parties with which it will deposit safe custody assets belonging to a client. The following terms are examples of the issues firms should address in this agreement:
(1) that the title of the account indicates that any safe custody asset credited to it does not belong to the firm;
(2) that the third party will hold or record a safe custody asset belonging to the firm's client separately from any applicable asset belonging to the firm or to the third party;
(3) the arrangements for registration or recording of the safe custody asset if this will not be registered in the client's name;
(4) [deleted]
(5) the restrictions over the circumstances in which the third party may withdraw assets from the account;
(6) the procedures and authorities for the passing of instructions to or by the firm;
(7) the procedures regarding the claiming and receiving of dividends, interest payments and other entitlements accruing to the client; and
(8) the provisions detailing the extent of the third party's liability in the event of the loss of a safe custody asset caused by the fraud, wilful default or negligence of the third party or an agent appointed by him.
CASS 6.3.4
01/01/2009
FCA
(1) A firm must only deposit safe custody assets with a third party in a jurisdiction which specifically regulates and supervises the safekeeping of safe custody assets for the account of another person with a third party who is subject to such regulation.
(2) A firm must not deposit safe custody assets held on behalf of a client with a third party in a country that is not an EEA State (third country) and which does not regulate the holding and safekeeping of safe custody assets for the account of another person unless:
(a) the nature of the safe custody assets or of the investment services connected with those safe custody assets requires them to be deposited with a third party in that third country; or
(b) the safe custody assets are held on behalf of a professional client and the client requests the firm in writing to deposit them with a third party in that third country.
(3) [deleted]
(a) [deleted]
(b) [deleted]
(i) [deleted]
(ii) [deleted]
(iii) [deleted]

[Note: article 17(2) and (3) of the MiFID implementing Directive]
CASS 6.3.5
01/04/2012
FCA
Subject to CASS 6.3.6 R, in relation to a third party with which a firm deposits safe custody assets belonging to a client, a firm must ensure that any agreement with that third party relating to the custody of those assets does not include the grant to that party, or to any other person, of a lien or a right of retention or sale over the safe custody assets, or a right of set-off over any client money derived from those safe custody assets.
CASS 6.3.6
01/04/2012
FCA
A firm may conclude an agreement with a third party relating to the custody of safe custody assets which confers on that party, or on another person instructed by that party to provide custody services for those assets, a lien, right of retention or sale, or right of set-off in favour of that party or that other person only if that lien or right:
(1) is confined to those safe custody assets held in an account with that third party or that other person and extends only to properly incurred charges and liabilities arising from the provision of custody services in respect of safe custody assets held in that account; or
(2) arises under the operating terms of a securities depository, securities settlement system or central counterparty in whose account safe custody assets are recorded or held, and provided that it does so for the purpose only of facilitating the settlement of trades involving the assets held in that account; or
(3) arises in relation to those safe custody assets held in a jurisdiction outside the United Kingdom, provided that:
(a) it does so as a result of local applicable law in that jurisdiction or is necessary for that firm to gain access to the local market in that jurisdiction; and
(b) in respect of each client to which those assets belong, either:
(i) the firm has taken reasonable steps to determine that holding those assets subject to that lien or right is in the best interests of that client; or
(ii) where a client is a professional client, the firm is instructed by that client to hold those assets in that jurisdiction notwithstanding the existence of that lien or right.
CASS 6.3.7
01/04/2012
FCA
A firm will be considered to be acting on the instructions of its professional client under CASS 6.3.6R (3)(b)(ii) where:
(1) the firm has received an individual instruction or has a standing instruction in its terms of business which results in it holding safe custody assets in the relevant jurisdiction; and
(2) prior to acting on the instruction, the firm has expressly informed the client that holding that client's safe custody assets in the relevant jurisdiction will involve the granting of a lien or right over those assets. The firm may do this by discussing the lien or right individually with the client or by including reference to it in terms of business (which may themselves cross refer to a separate list of relevant jurisdictions to which CASS 6.3.6R (3)(a) applies maintained on the firm's website in a form accessible to clients) or by a similar method.
CASS 6.3.8
01/04/2012
FCA
For the purpose of CASS 6.3.6 R, references to a safe custody asset include any client money derived from that safe custody asset. Client money derived from a safe custody asset may be regarded as held in the same account as that safe custody asset even though that money and those assets may be recorded separately.
CASS 6.3.9
01/04/2012
FCA
CASS 6.3.6 R does not permit a firm to agree to a right of set-off of the kind prohibited by either CASS 7.8.1 R or CASS 7.8.2 R in relation to client money.

CASS 6.4 Use of safe custody assets

CASS 6.4.1
06/04/2010
FCA
(1) A firm must not enter into arrangements for securities financing transactions in respect of safe custody assets held by it on behalf of a client or otherwise use such safe custody assets for its own account or the account of another client of the firm, unless:
(a) the client has given express prior consent to the use of the safe custody assets on specified terms; and
(b) the use of that client's safe custody assets is restricted to the specified terms to which the client consents.
(2) A firm must not enter into arrangements for securities financing transactions in respect of safe custody assets held by it on behalf of a client in an omnibus account held by a third party, or otherwise use safe custody assets held in such an account for its own account or for the account of another client unless, in addition to the conditions set out in (1):
(a) each client whose safe custody assets are held together in an omnibus account has given express prior consent in accordance with (1)(a); or
(b) the firm has in place systems and controls which ensure that only safe custody assets belonging to clients who have given express prior consent in accordance with the requirements of (1)(a) are used.
(3) For the purposes of obtaining the express prior consent of a retail client under this rule the signature of the retail client or an equivalent alternative mechanism is required.
(4) [deleted]

[Note: article 19 of the MiFID implementing Directive]
CASS 6.4.1A
01/07/2014
FCA
The FCA expects firms which enter into arrangements under CASS 6.4.1 R with retail clients to only enter into securities financing transactions and not otherwise use retail client's safe custody assets.
CASS 6.4.2
01/07/2014
FCA
Firms are reminded of the client's best interests rule, which requires the firm to act honestly, fairly and professionally in accordance with the best interests of their clients. For any transactions involving retail clients carried out under this section the FCA expects that:
(1) the firm ensures that relevant collateral is provided by the borrower in favour of the client;
(2) the current realisable value of the safe custody asset and of the relevant collateral is monitored daily; and
(3) the firm provides relevant collateral to make up the difference where the current realisable value of the collateral falls below that of the safe custody asset, unless otherwise agreed in writing by the client.
CASS 6.4.3
01/01/2009
FCA
Where a firm uses safe custody assets as permitted in this section, the records of the firm must include details of the client on whose instructions the use of the safe custody assets has been effected, as well as the number of safe custody assets used belonging to each client who has given consent, so as to enable the correct allocation of any loss.

[Note: article 19(2) of the MiFID implementing Directive]

CASS 6.5 Records, accounts and reconciliations

Records and accounts

CASS 6.5.1
01/01/2009
FCA
A firm must keep such records and accounts as necessary to enable it at any time and without delay to distinguish safe custody assets held for one client from safe custody assets held for any other client, and from the firm's own applicable assets.

[Note: article 16(1)(a) of the MiFID implementing Directive]
CASS 6.5.2
01/01/2009
FCA
A firm must maintain its records and accounts in a way that ensures their accuracy, and in particular their correspondence to the safe custody assets held for clients.

[Note: article 16(1)(b) of the MiFID implementing Directive]
CASS 6.5.2A
01/03/2011
FCA
A firm must keep a copy of every executed client agreement that includes that firm's right to use safe custody assets for its own account, including in the case of a prime brokerage agreement the disclosure annex referred to in CASS 9.3.1 R.

Record keeping

CASS 6.5.3
01/07/2014
FCA
Unless otherwise stated, a firm must ensure that any record made under the custody rules is retained for a period of five years starting from the later of:
(1) the date it was created; and
(2) (if it has been modified since the date it was created), the date it was most recently modified.

Internal reconciliation of safe custody assets held for clients

CASS 6.5.4
22/07/2013
FCA
(1)  Carrying out internal reconciliations of the safe custody assets held for each client with the safe custody assets held by the firm and third parties is an important step in the discharge of the firm's obligations under CASS 6.5.2 R (Records and accounts) and, where relevant, SYSC 4.1.1 R (General requirements) and SYSC 6.1.1 R (Compliance).
(1A) For a firm acting as trustee or depositary of an AIF that is an authorised AIF, carrying out internal reconciliations of the safe custody assets held for each client with the safe custody assets held by the firm and third parties is an important step in the discharge of the firm's obligations under article 89(1)(b) (Safekeeping duties with regard to assets held in custody) of the AIFMD level 2 regulation and, where relevant, SYSC 4.1.1 R (General requirements) and SYSC 6.1.1 R (Compliance).
(2) A firm should perform such internal reconciliations:
(a) as often as is necessary; and
(b) as soon as reasonably practicable after the date to which the reconciliation relates;
to ensure the accuracy of the firm's records and accounts.
(3) Reconciliation methods which can be adopted for these purposes include the 'total count method', which requires that all safe custody assets be counted and reconciled as at the same date.
(4) If a firm chooses to use an alternative reconciliation method (for example the 'rolling stock method') it needs to ensure that:
(a) all of a particular safe custody asset are counted and reconciled as at the same date; and
(b) all safe custody assets are counted and reconciled during a period of six months.
CASS 6.5.5
01/07/2014
[deleted]

Reconciliations with external records

CASS 6.5.6
01/01/2009
FCA
A firm must conduct on a regular basis, reconciliations between its internal accounts and records and those of any third parties by whom those safe custody assets are held.

[Note: article 16(1)(c) of the MiFID implementing Directive]
CASS 6.5.7
01/01/2009
FCA
Where a firm deposits safe custody assets belonging to a client with a third party, in complying with the requirements of CASS 6.5.6 R, the firm should seek to ensure that the third party will deliver to the firm a statement as at a date or dates specified by the firm which details the description and amounts of all the safe custody assets credited to the account, and that this statement is delivered in adequate time to allow the firm to carry out the periodic reconciliations required in CASS 6.5.6 R.
CASS 6.5.7A
22/07/2013
FCA
If a firm acting as trustee or depositary of an AIF that is an authorised AIF deposits safe custody assets belonging to a client with a third party, under article 89(1)(c) (Safekeeping duties with regard to assets held in custody) of the AIFMD level 2 regulation, the firm should seek to ensure that the third party will deliver to the firm a statement as at a date or dates specified by the firm which details the description and amounts of all the safe custody assets credited to the account, and that this statement is delivered in adequate time to allow the firm to carry out the periodic reconciliations required under article 89(1)(c) (Safekeeping duties with regard to assets held in custody) of the AIFMD level 2 regulation.

Frequency of external reconciliations

CASS 6.5.8
01/01/2009
FCA
A firm should perform the reconciliation required by CASS 6.5.6 R:
(1) as regularly as is necessary; and
(2) as soon as reasonably practicable after the date to which the reconciliation relates;
to ensure the accuracy of its internal accounts and records against those of third parties by whom safe custody assets are held.
CASS 6.5.8A
22/07/2013
FCA
A firm acting as trustee or depositary of an AIF that is an authorised AIF should perform the reconciliation under article 89(1)(c) (Safekeeping duties with regard to assets held in custody) of the AIFMD level 2 regulation:
(1) as regularly as is necessary; and
(2) as soon as reasonably practicable after the date to which the reconciliation relates;
to ensure the accuracy of its internal accounts and records against those of third parties by whom safe custody assets are held.

Independence of person conducting reconciliations

CASS 6.5.9
01/01/2009
FCA
Whenever possible, a firm should ensure that reconciliations are carried out by a person (for example an employee of the firm) who is independent of the production or maintenance of the records to be reconciled.

Reconciliation discrepancies

CASS 6.5.10
01/11/2007
FCA
A firm must promptly correct any discrepancies which are revealed in the reconciliations envisaged by this section, and make good, or provide the equivalent of, any unreconciled shortfall for which there are reasonable grounds for concluding that the firm is responsible.
CASS 6.5.11
01/11/2007
FCA
Items recorded or held within a suspense or error account fall within the scope of discrepancies.
CASS 6.5.12
01/11/2007
FCA
A firm may, where justified, conclude that another person is responsible for an irreconcilable shortfall despite the existence of a dispute with that other person about the unreconciled item. In those circumstances, the firm is not required to make good the shortfall but is expected to take reasonable steps to resolve the position with the other person.

Notification requirements

CASS 6.5.13
22/07/2013
FCA
A firm must inform the FCA in writing without delay:
(1) if it has not complied with, or is unable, in any material respect, to comply with the requirements in CASS 6.5.1 R, CASS 6.5.2 R or CASS 6.5.6 R; or
(1A) if it is a firm acting as trustee or depositary of an AIF and has not complied with, or is materially unable to comply with, the requirements in CASS 6.5.1 R and/or articles 89(1)(b) or 89(1)(c) (Safekeeping duties with regard to assets held in custody) of the AIFMD level 2 regulation; or
(2) if, having carried out a reconciliation, it has not complied with, or is unable, in any material respect, to comply with CASS 6.5.10 R.

Audit of compliance with the custody rules

CASS 6.5.14
01/04/2013
FCA
Firms are reminded that the auditor of the firm has to confirm in the report submitted to the FCA under SUP 3.10 (Duties of auditors: notification and report on client assets) that the firm has maintained systems adequate to enable it to comply with the custody rules.
Not in force until 01/06/2015

CASS 7.1 Application and Purpose

Application

CASS 7.1.1
01/07/2014
[deleted]
CASS 7.1.1A
01/07/2014
FCA
This chapter applies to a firm that receives money from or holds money for, or on behalf of, a client in the course of, or in connection with, its:
(1) MiFID business; and/or
(2) designated investment business; and/or
(3) stocks and shares ISA business;
unless otherwise specified in this section.
CASS 7.1.1B
01/07/2014
FCA
A firm is reminded that when CASS 7.1.1A R applies it should treat client money in an appropriate manner so that, for example:
(1) if it holds client money in a client bank account, that account is held in the firm's name in accordance with CASS 7.4.11A R;
(2) if it allows another person to hold client money this is effected under CASS 7.5; and
(3) its internal reconciliations of client money carried out in line with CASS 7.6.6 G and CASS 7 Annex 1 take into account any client equity balance relating to its margined transaction requirements.
CASS 7.1.2
01/01/2009
[deleted]

Opt-in to the client money rules

CASS 7.1.3
01/07/2014
FCA
(1) A firm that receives or holds money to which this chapter applies in relation to:
(a) its MiFID business; or
(b) its MiFID business and its designated investment business which is not MiFID business;
and holds money in respect of which CASS 5 applies, may elect to comply with the provisions of this chapter in respect of all such money and if it does so, this chapter applies as if all such money were money that the firm receives and holds in the course of, or in connection with, its MiFID business.
(1A) [deleted]
(1B) A firm that receives or holds money to which this chapter applies solely in relation to its designated investment business which is not MiFID business and receives or holds money in respect of which the insurance client money chapter applies, may elect to comply with the provisions of this chapter in respect of all such money and if it does so, this chapter applies as if all such money were money that the firm receives and holds in the course of or in connection with its designated investment business.
(1C) 
(a) A firm may elect to comply with all the provisions of this chapter for money that it receives or holds in respect of an ISA that only contains a cash deposit ISA.
(b) Where a firm makes an election under (a), this chapter applies to it in the same way that it applies to a firm that receives and holds money in the course of or in connection with its MIFID business.
(2) A firm must make and retain a written record of any election it makes under this rule, including the date from which the election is to be effective. The firm must make the record on the date it makes the election and must keep it for a period of five years after ceasing to use it.
(3) This rule is subject to CASS 1.2.11 R.
CASS 7.1.3A
01/07/2014
FCA
Firms are reminded that, under CASS 1.2.11R (1), they must not keep money in respect of which the client money chapter applies in the same client bank account or client transaction account as money in respect of which the insurance client money chapter applies.
CASS 7.1.3B
01/07/2014
FCA
Where a firm opts into this chapter under CASS 7.1.3R (1C) it must notify clients for whom it holds the opted-in money that it is holding their money in accordance with the client money rules.
CASS 7.1.4
01/07/2014
FCA
The opt-in to the client money rules inthis chapter does not apply in respect of money that a firm holds outside of either the:
(1) scope of the insurance client money chapter; or
(2) relevant cash deposit ISA wrapper;
as the case may be.
CASS 7.1.5
01/01/2009
FCA
If a firm has opted to comply with this chapter, the insurance client money chapter will have no application to the activities to which the election applies.
CASS 7.1.6
01/07/2014
FCA
(1) A firm that is only subject to the insurance client money chapter may not opt to comply with this chapter under either or both CASS 7.1.3R (1) and CASS 7.1.3R (1B).
(2) Under CASS 7.1.3R (1C) a firm may opt to comply with this chapter regardless of whether it is otherwise subject to the client money rules.
CASS 7.1.7
01/01/2009
[deleted]
CASS 7.1.7A
01/01/2009
[deleted]

Money that is not client money: 'opt outs' for any business other than insurance mediation activity

CASS 7.1.7B
01/01/2009
FCA
CASS 7.1.7C G to CASS 7.1.7I G do not apply to a firm in relation to money held in connection with its MiFID business to which this chapter applies or in relation to money for which the firm has made an election under CASS 7.1.3R (1).

Professional client opt-out

CASS 7.1.7C
01/01/2009
FCA
The 'opt out' provisions provide a firm with the option of allowing a professional client to choose whether their money is subject to the client money rules (unless the firm is conducting insurance mediation activity).
CASS 7.1.7D
01/01/2009
FCA
Subject to CASS 7.1.7F R, money is not client money when a firm (other than a sole trader) holds that money on behalf of, or receives it from, a professional client, other than in the course of insurance mediation activity, and the firm has obtained written acknowledgement from the professional client that:
(1) money will not be subject to the protections conferred by the client money rules;
(2) as a consequence, this money will not be segregated from the money of the firm in accordance with the client money rules and will be used by the firm in the course of its own business; and
(3) the professional client will rank only as a general creditor of the firm.

'Opt-outs' for non-IMD business

CASS 7.1.7E
01/01/2009
FCA
For a firm whose business is not governed by the Insurance Mediation Directive, it is possible to 'opt out' on a one-way basis. However, in order to maintain a comparable regime to that applying to MiFID business, all 'MiFID type' business undertaken outside the scope of MiFID, should comply with the client money rules or be 'opted out' on a two-way basis.
CASS 7.1.7F
01/01/2009
FCA
Money is not client money if a firm, in respect of designated investment business which is not an investment service or activity, an ancillary service, a listed activity or insurance mediation activity:
(1) holds it on behalf of or receives it from a professional client who is not an authorised person; and
(2) has sent a separate written notice to the professional client stating the matters set out in CASS 7.1.7DR (1) to CASS 7.1.7DR (3).
CASS 7.1.7G
01/01/2009
FCA
When a firm undertakes a range of business for a professional client and has separate agreements for each type of business undertaken, the firm may treat client money held on behalf of the client differently for different types of business; for example, a firm may, under CASS 7.1.7D R or CASS 7.1.7F R, elect to segregate client money in connection with securities transactions and not segregate (by complying with CASS 7.1.7D R or CASS 7.1.7F R) money in connection with contingent liability investments for the same client.
CASS 7.1.7H
01/01/2009
FCA
When a firm transfers client money to another person, the firm must not enter into an agreement under CASS 7.1.7D R or CASS 7.1.7F R with that other person in relation to that client money or represent to that other person that the money is not client money.
CASS 7.1.7I
01/01/2009
FCA
CASS 7.1.7H R prevents a firm, when passing client money to another person under CASS 7.5.2 R (transfer of client money to a third party), from making use of the 'opt out' provisions under CASS 7.1.7D R or CASS 7.1.7F R.

Credit institutions and approved banks

CASS 7.1.8
01/01/2014
FCA
The client money rules do not apply to a CRD credit institution in relation to deposits within the meaning of the CRD held by that institution.
[Note: article 13(8) of MiFID and article 18(1) of the MiFID implementing Directive]
CASS 7.1.9
06/04/2010
FCA
If a credit institution that holds money as a deposit with itself is subject to the requirement to disclose information before providing services, it should, in compliance with that obligation, notify the client that:
(1) money held for that client in an account with the credit institution will be held by the firm as banker and not as trustee (or in Scotland as agent); and
(2) as a result, the money will not be held in accordance with the client money rules.
CASS 7.1.10
01/11/2007
FCA
Pursuant to Principle 10 (Clients' assets), a credit institution that holds money as a deposit with itself should be able to account to all of its clients for amounts held on their behalf at all times. A bank account opened with the firm that is in the name of the client would generally be sufficient. When money from clients deposited with the firm is held in a pooled account, this account should be clearly identified as an account for clients. The firm should also be able to demonstrate that an amount owed to a specific client that is held within the pool can be reconciled with a record showing that individual's client balance and is, therefore, identifiable at any time. Similarly, where that money is reflected only in a firm's bank account with other banks (nostro accounts), the firm should be able to reconcile amounts owed to that client within a reasonable period of time.
(1) it should be able to account to all of its clients sums held for them at all times; and
(2) that money should, pursuant to Principle 10, be allocated to the relevant client promptly. This should be done no later than ten business days after the firm has received the money.
CASS 7.1.11
01/11/2007
FCA
A credit institution is reminded that the exemption for deposits is not an absolute exemption from the client money rules.
CASS 7.1.11A
01/01/2014
FCA
(1) This rule applies to a firm which is an approved bank but not a CRD credit institution.
(2) The client money rules do not apply to money held by the approved bank if it is undertaking business which is not MiFID business but only when the money is held in an account with itself, in which case the firm must notify the client in writing that:
(a) money held for that client in an account with the approved bank will be held by the firm as banker and not as trustee (or in Scotland as agent); and
(b) as a result, the money will not be held in accordance with the client money rules.

Affiliated companies - MiFID business

CASS 7.1.12
01/11/2007
FCA
A firm that holds money on behalf of, or receives money from, an affiliated company in respect of MiFID business must treat the affiliated company as any other client of the firm for the purposes of this chapter.

Affiliated companies - non-MiFID business

CASS 7.1.12A
01/01/2009
FCA
A firm that holds money on behalf of, or receives money from, an affiliated company in respect of designated investment business which is not MiFID business must not treat the money as client money unless:
(1) the firm has been notified by the affiliated company that the money belongs to a client of the affiliated company; or
(2) the affiliated company is a client dealt with at arm's length; or
(3) the affiliated company is a manager of an occupational pension scheme or is an overseas company; and
(a) the money is given to the firm in order to carry on designated investment business for or on behalf of the clients of the affiliated company; and
(b) the firm has been notified by the affiliated company that the money is to be treated as client money.
CASS 7.1.13
01/01/2009
[deleted]

Coins

CASS 7.1.14
01/11/2007
FCA
The client money rules do not apply with respect to coins held on behalf of a client if the firm and the client have agreed that the money (or money of that type) is to be held by the firm for the intrinsic value of the metal which constitutes the coin.

Solicitors

CASS 7.1.15
01/07/2014
FCA
(1) An authorised professional firm regulated by the Law Society (of England and Wales), the Law Society of Scotland or the Law Society of Northern Ireland that, with respect to its regulated activities, is subject to the following rules of its designated professional body, must comply with those rules and, where relevant paragraph (3), and if it does so, it will be deemed to comply with the client money rules.
(2) The relevant rules are:
(a) if the firm is regulated by the Law Society (of England and Wales), the SRA Accounts Rules 2011;
(b) if the firm is regulated by the Law Society of Scotland, the Law Society of Scotland Practice Rules 2011; and
(c) if the firm is regulated by the Law Society of Northern Ireland, the Solicitors' Accounts Regulations 1998.
(3) If the firm in (1) is a MiFID investment firm that receives or holds money for, or on behalf of a client in the course of, or in connection with its MiFID business, it must also comply with the MiFID client money (minimum implementing) rules in relation to that business.

Long term insurers and friendly societies

CASS 7.1.15A
01/01/2009
FCA
This chapter does not apply to the permitted activities of a long-term insurer or a friendly society, unless it is a MiFID investment firm that receives money from or holds money for or on behalf of a client in the course of, or in connection with, its MiFID business.

Contracts of insurance

CASS 7.1.15B
01/07/2014
[deleted]
CASS 7.1.15BA
01/07/2014
FCA
Provided it complies with CASS 1.2.11 R, a firm that receives or holds client money in relation to contracts of insurance may elect to comply with the provisions of the insurance client money chapter, instead of this chapter, in respect of all such money.
CASS 7.1.15C
01/07/2014
FCA
A firm must make and retain a written record of any election which it makes under CASS 7.1.15BA R.

Life assurance business

CASS 7.1.15D
01/01/2009
FCA
(1) A firm which receives and holds client money in respect of life assurance business in the course of its designated investment business that is not MiFID business may:
(a) under CASS 7.1.3R (1B) elect to comply with the client money chapter in respect of such client money and in doing so avoid the need to comply with the insurance client money chapter which would otherwise apply to the firm in respect of client money received in the course of its insurance mediation activity; or
(b) under CASS 7.1.15B R, elect to comply with the insurance client money chapter in respect of such client money.
(2) These options are available to a firm irrespective of whether it also receives and holds client money in respect of other parts of its designated investment business. A firm may not however choose to comply with the insurance client money chapter in respect of client money which it receives and holds in the course of any part of its designated investment business which does not involve an insurance mediation activity.

Trustee firms

CASS 7.1.15E
01/01/2009
FCA
A trustee firm which holds money in relation to its designated investment business which is not MiFID business to which this chapter applies, must hold any such client money separate from its own money at all times.
CASS 7.1.15F
01/07/2014
FCA
Subject to CASS 7.1.15G R only the client money rules listed in the table below apply to a trustee firm in connection with money that the firm receives, or holds for or on behalf of a client in the course of or in connection with its designated investment business which is not MiFID business.
ReferenceRule
CASS 7.1.1 R to CASS 7.1.6 G, and CASS 7.1.8 R to CASS 7.1.14 RApplication
CASS 7.1.15E R to CASS 7.1.15L GTrustee firms
CASS 7.1.16 GGeneral principle
CASS 7.4.1 R to CASS 7.4.6 GDepositing client money
CASS 7.4.7 R to CASS 7.4.13 GA firm's selection of credit institution, bank or money market fund
CASS 7.6.6 G to CASS 7.6.16 RReconciliation of client money balances
CASS 7.7.2 R to CASS 7.7.4 GRequirement
CASS 7 Annex 1The standard methods of internal client money reconciliation

CASS 7.1.15G
01/07/2014
FCA
(1) A trustee firm to which CASS 7.1.15F R applies may, in addition to the client money rules set out at CASS 7.1.15F R, also elect to comply with:
(a) all the client money rules in CASS 7.4 (Segregation of client money);
(b) CASS 7.5 (Transfer of client money to a third party);
(c) all the client money rules in CASS 7.6 (Records, accounts and reconciliations); or
(d) CASS 7.8 (Notification and acknowledgement of trust).
(2) A trustee firm must make a written record of any election it makes under this rule, including the date from which the election is to be effective. The firm must make the record on the date it makes the election and must keep it for a period of five years after ceasing to use it.
(3) Where a trustee firm has made an election under (1) which it subsequently decides to cease to use, it must make a written record of this decision, including the date from which the decision is to be effective, and keep that record from the date the decision is made for a period of five years after the date it is to be effective.
CASS 7.1.15H
01/07/2014
FCA
A trustee firm to which CASS 7.1.15F R applies and which is otherwise subject to the client money rules must ensure that any client money it holds other than in its capacity as trustee firm is segregated from client money it holds as a trustee firm.
CASS 7.1.15I
01/07/2014
FCA
A trustee firm to which CASS 7.1.15F R applies and which is otherwise subject to the client money rules should ensure that in designing its systems and controls it:
(1) takes into account that the client money distribution rules will only apply in relation to any client money that the firm holds other than in its capacity as trustee firm; and
(2) has regard to other legislation that may be applicable.
CASS 7.1.15J
01/07/2014
FCA
(1) A trustee firm to which CASS 7.1.15F R applies may elect that:
(a) the applicable provisions of CASS 7.4 (Segregation of client money) and CASS 7.6 (Records, accounts and reconciliations) under CASS 7.1.15F R; and
(b) and any further provisions it elects to comply with under CASS 7.1.15GR (1);
will apply separately and concurrently for each distinct trust that the trustee firm acts for.
(2) A trustee firm must make a written record of any election it makes under this rule, including the date from which the election is to be effective. The firm must make the record on the date it makes the election and must keep it for a period of five years after ceasing to use it.
(3) Where a trustee firm has made an election under (1) which it subsequently decides to cease to use, it must make a written record of this decision, including the date from which the decision is to be effective, and must keep that record from the date the decision is made for a period of five years after the date it is to be effective.
CASS 7.1.15K
01/07/2014
FCA
A trustee firm may wish to make an election under CASS 7.1.15J R if, for example, it acts for a number of distinct trusts which it wishes, or is required, to keep operationally separate. If a firm makes such an election then it should:
(1) establish and maintain adequate internal systems and controls to effectively segregate client money held for one trust from client money held for another trust; and
(2) conduct internal client money reconciliations as set out in CASS 7 Annex 1 and external client money reconciliations under CASS 7.6.9 R for each trust.
CASS 7.1.15L
01/07/2014
FCA
The provisions in CASS 7.1.15E R to CASS 7.1.15K G do not affect the general application of the client money rules regarding money that is held by a firm other than in its capacity as a trustee firm.

General purpose

CASS 7.1.16
06/04/2010
FCA
(1) Principle 10 (Clients' assets) requires a firm to arrange adequate protection for clients' assets when the firm is responsible for them. An essential part of that protection is the proper accounting and treatment of client money. The client money rules provide requirements for firms that receive or hold client money, in whatever form.
(2) The client money rules also, where relevant, implement the provisions of MiFID which regulate the obligations of a firm when it holds client money in the course of its MiFID business.

CASS 7.2 Treatment of client money

CASS 7.2.1
01/01/2009
[deleted]
CASS 7.2.2
01/01/2009
[deleted]

Title transfer collateral arrangements

CASS 7.2.3
01/10/2011
FCA
(1) Where a client transfers full ownership of money to a firm for the purpose of securing or otherwise covering present or future, actual or contingent or prospective obligations, such money should no longer be regarded as client money.
[Note: recital 27 to MiFID]
(2) Excepted from (1) is a transfer of the full ownership of money:
(a) belonging to a retail client;
(b) whose purpose is to secure or otherwise cover that client's present or future, actual, contingent or prospective obligations under a contract for differences or a rolling spot forex contract that is a future, and in either case where that contract is entered into with a firm acting as market maker; and
(c) which is made to that firm or to any other person arranging on its behalf.
CASS 7.2.3A
01/10/2011
FCA
(1) Subject to (2), where a firm makes arrangements for the purpose of securing or otherwise covering present or future, actual, contingent or prospective obligations of a retail client those arrangements must not provide for the taking of a transfer of full ownership of any of that client's money.
(2) The application of (1) is confined to the taking of a transfer of full ownership:
(a) whose purpose is to secure or otherwise cover that retail client's obligations under a contract for differences or a rolling spot forex contract that is a future, and in either case where that contract is entered into with a firm acting as market maker; and
(b) which is made to that firm or to any other person arranging on its behalf.
 
CASS 7.2.4
01/11/2007
FCA
A title transfer financial collateral arrangement under the Financial Collateral Directive is an example of a type of transfer of money to cover obligations where that money will not be regarded as client money.
CASS 7.2.5
01/01/2013
FCA
Where a firm has received full title or full ownership to money under a collateral arrangement, the fact that it has also granted a security interest to its client to secure its obligation to repay that money to the client would not result in the money being client money. This can be compared to a situation in which a firm takes a charge or other security interest over money held in a client bank account, where that money would still be client money as there would be no absolute transfer of title to the firm. However, where a firm has received client money under a security interest and the security interest includes a "right to use arrangement", under which the client agrees to transfer all of its rights to money in that account to the firm upon the exercise of the right to use, the money may cease to be client money, but only once the right to use is exercised and the money is transferred out of the client bank account to the firm.
CASS 7.2.6
01/11/2007
FCA
Firms are reminded of the client's best interest rule, which requires a firm to act honestly, fairly and professionally in accordance with the best interests of its clients when structuring its business particularly in respect of the effect of that structure on firms' obligations under the client money rules.
CASS 7.2.7
01/11/2007
FCA
Pursuant to the client's best interests rule, a firm should ensure that where a retail client transfers full ownership of money to a firm:
(1) the client is notified that full ownership of the money has been transferred to the firm and, as such, the client no longer has a proprietary claim over this money and the firm can deal with it on its own right;
(2) the transfer is for the purposes of securing or covering the client's obligations;
(3) an equivalent transfer is made back to the client if the provision of collateral by the client is no longer necessary; and
(4) there is a reasonable link between the timing and the amount of the collateral transfer and the obligation that the client owes, or is likely to owe, to the firm.

Money in connection with a "delivery versus payment" transaction

CASS 7.2.8
01/11/2007
FCA
Money need not be treated as client money in respect of a delivery versus payment transaction through a commercial settlement system if it is intended that either:
(1) in respect of a client's purchase, money from a client will be due to the firm within one business day upon the fulfilment of a delivery obligation; or
(2) in respect of a client's sale, money is due to the client within one business day following the client's fulfilment of a delivery obligation;
unless the delivery or payment by the firm does not occur by the close of business on the third business day following the date of payment or delivery of the investments by the client.
CASS 7.2.8A
01/01/2009
FCA
The exclusion from the client money rules for delivery versus payment transactions under CASS 7.2.8 R is an example of an exclusion from the client money rules which is permissible by virtue of recital 26 of MiFID.
CASS 7.2.8B
01/07/2013
FCA
Money need not be treated as client money in respect of a delivery versus payment transaction, for the purpose of settling a transaction in relation to units in a regulated collective investment scheme, if:
(1) the authorised fund manager receives it from a client in relation to the authorised fund manager's obligation to issue units, in an AUT or ACS, or to arrange for the issue of units in an ICVC, in accordance with COLL, unless the price of those units has not been determined by the close of business on the next business day:
(a) following the date of the receipt of the money from the client; or
(b) if the money was received by an appointed representative of the authorised fund manager, in accordance with CASS 7.4.24 G, following the date of receipt at the specified business address of the authorised fund manager; or
(2) the money is held in the course of redeeming units where the proceeds of that redemption are paid to a client within the time specified in COLL; when an authorised fund manager draws a cheque or other payable order within these time frames the provisions of CASS 7.2.17 R and CASS 7.2.9R (2) will not apply.

Money due and payable to the firm

CASS 7.2.9
01/11/2007
FCA
(1) Money is not client money when it becomes properly due and payable to the firm for its own account.
(2) For these purposes, if a firm makes a payment to, or on the instructions of, a client, from an account other than a client bank account, until that payment has cleared, no equivalent sum from a client bank account for reimbursement will become due and payable to the firm.
CASS 7.2.10
01/11/2007
FCA
Money held as client money becomes due and payable to the firm or for the firm's own account, for example, because the firm acted as principal in the contract or the firm, acting as agent, has itself paid for securities in advance of receiving the purchase money from its client. The circumstances in which it is due and payable will depend on the contractual arrangement between the firm and the client.
CASS 7.2.10A
01/12/2010
FCA
Firms are reminded that, notwithstanding that money may be due and payable to them, they have a continuing obligation to segregate client money in accordance with the client money rules. In particular, in accordance with CASS 7.6.2 R, firms must ensure the accuracy of their records and accounts and are reminded of the requirement to carry out internal reconciliations of client money balances, either in accordance with the standard method of internal client money reconciliation or a different method which meets the requirements of CASS 7.6.7 R and CASS 7.6.8 R.
CASS 7.2.11
01/11/2007
FCA
When a client's obligation or liability, that is secured by that client's asset, crystallises, and the firm realises the asset in accordance with an agreement entered into between the client and the firm, the part of the proceeds of the asset to cover such liability that is due and payable to the firm is not client money. However, any proceeds of sale in excess of the amount owed by the client to the firm should be paid over to the client immediately or be held in accordance with the client money rules.

Commission rebate

CASS 7.2.12
01/11/2007
FCA
When a firm has entered into an arrangement under which commission is rebated to a client, those rebates need not be treated as client money until they become due and payable to the client in accordance with the terms of the contractual arrangements between the parties.
CASS 7.2.13
01/11/2007
FCA
When commission rebate becomes due and payable to the client, the firm should:
(1) treat it as client money; or
(2) pay it out in accordance with the rule regarding the discharge of a firm's fiduciary duty to the client (see CASS 7.2.15 R);
unless the firm and the client have entered into an arrangement under which the client has agreed to transfer full ownership of this money to the firm as collateral against payment of future professional fees (see CASS 7.2.3 R (Title transfer collateral arrangements)).

Interest

CASS 7.2.14
01/07/2014
[deleted]
CASS 7.2.14A
01/07/2014
FCA
A firm must pay a retail client any interest earned on client money held for that client unless it has otherwise notified him in writing.
CASS 7.2.14B
01/07/2014
FCA
(1) The firm may, under the terms of its agreement with the client, pay some, none, or all interest earned to the relevant client.
(2) Where interest is payable on client money by a firm to clients:
(a) such sums are client money and so, if not paid to, or to the order of the clients, are required to be segregated in accordance with CASS 7.4 (Segregation of client money);
(b) the interest should be paid to clients in accordance with the firm's agreement with each client; and
(c) if the firm's agreement with the client is silent as to when interest should be paid to the client the firm should follow CASS 7.4.28 G (Allocation of client money receipts);
irrespective of whether the client is a retail client or otherwise.

Discharge of fiduciary duty

CASS 7.2.15
01/07/2014
FCA
Money ceases to be client money (having regard to CASS 7.2.17 R where applicable) if:
(1) it is paid to the client, or a duly authorised representative of the client; or
(2) it is:
(a) paid to a third party on the instruction of, or with the specific consent of, the client unless it is transferred to a third party in the course of effecting a transaction under CASS 7.5.2 R (Transfer of client money to a third party); or
(b) paid to a third party pursuant to an obligation on the firm where:
(i) that obligation arises under an enactment; and
(ii) the obligation under that enactment is applicable to the firm as a result of the nature of the business being undertaken by the firm for its client; or
(3) subject to CASS 7.2.16A R, it is paid into a bank account of the client (not being an account which is also in the name of the firm); or
(4) it is due and payable to the firm in accordance with CASS 7.2.9 R (Money due and payable to the firm); or
(5) it is paid to the firm as an excess in the client bank account (see CASS 7.6.13R (2) (Reconciliation discrepancies)); or
(6) it is paid by an authorised central counterparty to a clearing member other than the firm in connection with a porting arrangement in accordance with CASS 7.2.15A R; or
(7) it is paid by an authorised central counterparty directly to the client in accordance with CASS 7.2.15B R; or
(8) it is transferred by the firm to a clearing member in connection with a regulated clearing arrangement and the clearing member remits payment to another firm or to another clearing member in accordance with CASS 7.2.15CR (1); or
(9) it is transferred by the firm to a clearing member in connection with a regulated clearing arrangement and the clearing member remits payment directly to the indirect clients of the firm in accordance with CASS 7.2.15CR (2).
CASS 7.2.15A
01/10/2013
FCA
Client money which the firmplaces at an authorised central counterparty in connection with a regulated clearing arrangement ceases to be client money for that firm if, as part of the default management process of that authorised central counterparty in respect of a default by the firm, it is ported by the authorised central counterparty in accordance with article 48 of EMIR.
CASS 7.2.15B
01/10/2013
FCA
Client money which the firmplaces at an authorised central counterparty in connection with a regulated clearing arrangement ceases to be client money if, as part of the default management process of that authorised central counterparty in respect of a default by the firm, it is paid directly to the client by the authorised central counterparty in accordance with the procedure described in article 48(7) of EMIR.
CASS 7.2.15C
01/10/2013
FCA
Client money received or held by the firm and transferred to a clearing member who facilitates indirect clearing through a regulated clearing arrangement ceases to be client money for that firm and, if applicable, the clearing member, if the clearing member:
(1) remits payment to another firm or to another clearing member in accordance with default management procedures adopted by the clearing member which comply with the requirements of article 4(4) of the EMIR L2 Regulation; or
(2) remits payment to the indirect clients of the firm in accordance with default management procedures adopted by the clearing member which comply with the requirements of articles 4(4) and 4(5) of the EMIR L2 Regulation.
CASS 7.2.15D
01/07/2014
FCA
Client money received or held by the firm for a sub-pool ceases to be client money for that firm to the extent that such client money is transferred by the firm to an authorised central counterparty or a clearing member as result of porting.
CASS 7.2.16
01/07/2014
[deleted]
CASS 7.2.16A
01/07/2014
FCA
A firm must not pay client money into a bank account of the client that has been opened without the consent of that client.
CASS 7.2.17
01/11/2007
FCA
When a firm draws a cheque or other payable order to discharge its fiduciary duty to the client, it must continue to treat the sum concerned as client money until the cheque or order is presented and paid by the bank.
 

Allocated but unclaimed client money

CASS 7.2.18
01/11/2007
FCA
The purpose ofthe rule on allocated but unclaimed client money is to allow a firm, in the normal course of its business, to cease to treat as client money any balances,allocated to an individual client, when those balances remain unclaimed.
CASS 7.2.19
01/11/2007
FCA
A firm may cease to treat as client money any unclaimed client money balance if it can demonstrate that it has taken reasonable steps to trace the client concerned and to return the balance.
CASS 7.2.20
01/11/2007
FCA
(1) Taking reasonable steps should include:
(a) entering into a written agreement, in which the client consents to the firm releasing, after the period of time specified in (b), any client money balances, for or on behalf of that client, from client bank accounts;
(b) determining that there has been no movement on the client's balance for a period of at least six years (notwithstanding any payments or receipts of charges, interest or similar items);
(c) writing to the client at the last known address informing the client of the firm's intention of no longer treating that balance as client money, giving the client 28 days to make a claim;
(d) making and retaining records of all balances released from client bank accounts; and
(e) undertaking to make good any valid claim against any released balances.
(2) Compliance with (1) may be relied on as tending to establish compliance with CASS 7.2.19 R.
(3) Contravention of (1) may be relied on as tending to establish contravention of CASS 7.2.19 R.
CASS 7.2.21
01/11/2007
FCA
When a firm gives an undertaking to make good any valid claim against released balances, it should make arrangements authorised by the firm's relevant controllers that are legally enforceable by any person with a valid claim to such money.

CASS 7.3 Organisational requirements: client money

Requirement to protect client money

CASS 7.3.1
01/11/2007
FCA
A firm must, when holding client money, make adequate arrangements to safeguard the client's rights and prevent the use of client money for its own account.
[Note: article 13(8) of MiFID]

Requirement to have adequate organisational arrangements

CASS 7.3.2
01/11/2007
FCA
A firm must introduce adequate organisational arrangements to minimise the risk of the loss or diminution of client money, or of rights in connection with client money, as a result of misuse of client money, fraud, poor administration, inadequate record-keeping or negligence.
[Note: article 16(1)(f) of the MiFID implementing Directive]

CASS 7.4 Segregation of client money

Depositing client money

CASS 7.4.-1
01/07/2014
FCA
Where a firm establishes one or more sub-pools, the provisions of CASS 7.4 (Segregation of client money) shall be read as applying separatelyto the firm's general pool and each sub-pool in line with CASS 7.19.3 R and CASS 7.19.12 R.
CASS 7.4.1
01/01/2014
FCA
A firm, on receiving any client money, must promptly place this money into one or more accounts opened with any of the following:
(1) a central bank;
(2) a CRD credit institution;
(3) a bank authorised in a third country;
(4) a qualifying money market fund.
[Note: article 18(1) of the MiFID implementing Directive]
CASS 7.4.2
01/01/2014
FCA
An account with a central bank, a CRD credit institution or a bank authorised in a third country in which client money is placed is a client bank account.

Qualifying money market funds

CASS 7.4.3
01/07/2014
[deleted]
CASS 7.4.3A
01/07/2014
FCA
Where a firm deposits client money with a qualifying money market fund, the firm's holding of those units in that fund will be subject to any applicable requirements of the custody rules.

[Note: recital 23 to the MiFID implementing Directive]
CASS 7.4.4
01/11/2007
FCA
A firm that places client money in a qualifying money market fund should ensure that it has the permissions required to invest in and hold units in that fund and must comply with the rules that are relevant for those activities.
CASS 7.4.5
01/11/2007
FCA
A firm must give a client the right to oppose the placement of his money in a qualifying money market fund.
[Note: article 18(3) of the MiFID implementing Directive]
CASS 7.4.6
01/07/2014
FCA
If a firm that intends to place client money in a qualifying money market fund is subject to the requirement to disclose information before providing services, it should, in compliance with that obligation, notify the client that:
(1) money held for that client will be held in a qualifying money market fund; and
(2) as a result, the money will not be held in accordance with the client money rules; and
(3) if it is the case, that the units will be held as the client's safe custody assets in accordance with the custody rules.

A firm's selection of a credit institution, bank or money market fund

CASS 7.4.7
01/11/2007
FCA
A firm that does not deposit client money with a central bank must exercise all due skill, care and diligence in the selection, appointment and periodic review of the credit institution, bank or qualifying money market fund where the money is deposited and the arrangements for the holding of this money.
[Note: article 18(3) of the MiFID implementing Directive]
CASS 7.4.8
01/11/2007
FCA
When a firm makes the selection, appointment and conducts the periodic review of a credit institution, a bank or a qualifying money market fund, it must take into account:
(1) the expertise and market reputation of the third party; and
(2) any legal requirements or market practices related to the holding of client money that could adversely affect clients' rights.
[Note: article 18(3) of the MiFID implementing Directive]
CASS 7.4.9
01/11/2007
FCA
In discharging its obligations when selecting, appointing and reviewing the appointment of a credit institution, a bank or a qualifying money market fund, a firm should also consider, together with any other relevant matters:
(1) the need for diversification of risks;
(2) the capital of the credit institution or bank;
(3) the amount of client money placed, as a proportion of the credit institution or bank's capital and deposits, and, in the case of a qualifying money market fund, compared to any limit the fund may place on the volume of redemptions in any period;
(4) the credit rating of the credit institution or bank; and
(5) to the extent that the information is available, the level of risk in the investment and loan activities undertaken by the credit institution or bank and affiliated companies.
CASS 7.4.9A
01/06/2011
FCA
A firm must limit the funds that it deposits or holds with a relevant group entity or combination of such entities so that those funds do not at any point in time exceed 20 per cent of the balance on:
(1) all of its general client bank accounts considered in aggregate;
(2) each of its designated client bank accounts; and
(3) each of its designated client fund accounts.
CASS 7.4.9B
01/07/2014
FCA
For the purpose of CASS 7.4.9A R an entity is a relevant group entity if it is:
(1) a CRD credit institution or a bank authorised in a third country; and
(2) a member of the same group as that firm.
CASS 7.4.9C
01/04/2013
FCA
The rules in SUP 16.14 provide that a firm must report to the FCA in relation to the identity of the entities with which it deposits client money and the amounts of client money deposited with them. The FCA will use that information to monitor compliance with the diversification rule in CASS 7.4.9A R.
CASS 7.4.10
01/11/2007
FCA
A firm must make a record of the grounds upon which it satisfies itself as to the appropriateness of its selection of a credit institution, a bank or a qualifying money market fund. The firm must make the record on the date it makes the selection and must keep it from the date of such selection until five years after the firm ceases to use the third party to hold client money.

Client bank accounts

CASS 7.4.11
01/11/2007
FCA
A firm must take the necessary steps to ensure that client money deposited, in accordance with CASS 7.4.1 R, in a central bank, a credit institution, a bank authorised in a third country or a qualifying money market fund is held in an account or accounts identified separately from any accounts used to hold money belonging to the firm.
[Note: article 16(1)(e) of the MiFID implementing Directive]
CASS 7.4.11A
01/07/2014
FCA
(1) An account which the firm uses to deposit client money under CASS 7.4.1R (1) to CASS 7.4.1R (3) must be a client bank account.
(2) Each client bank account used by a firm must be held on terms under which:
(a) the relevant bank's contractual counterparty is the firm that is subject to the requirement under CASS 7.4.1 R; and
(b) unless the firm has agreed terms that comply with CASS 7.4.11AR (3), the firm is able to make withdrawals of client money promptly and, in any event, within one business day of a request for withdrawal.
Transitional provision CASS TP 1.10AR applies to (2).
(3) Firms may use client bank accounts held on terms under which withdrawals are, without exception, prohibited until the expiry of a fixed term or a notice period of a maximum of 30 days.
(4) Paragraphs (2)(b) and (3) do not apply in respect of client money received by a firm in its capacity as a trustee firm.
CASS 7.4.11B
01/07/2014
FCA
CASS 7.4.11AR (2)(b) and CASS 7.4.11AR (3) do not prevent a firm from depositing client money on terms under which a withdrawal may be made before the expiry of a fixed term or a notice period (whatever the duration), including where such withdrawal would incur a penalty charge to the firm.
CASS 7.4.11C
01/07/2014
FCA
CASS 7.4.11A R does not prevent a firm from depositing client money in overnight money market deposits which are clearly identified as being client money (for example, in the client bank account acknowledgment letter).
CASS 7.4.11D
01/07/2014
FCA
Firms are reminded of their obligations under CASS 7.8 (Notification and acknowledgement of trust) for client bank accounts. Firms should also ensure that client bank accounts meet the requirements in the relevant Glossary definitions, including regarding the titles given to the accounts.
CASS 7.4.12
01/07/2014
FCA
A firm may open one or more client bank accounts in the form of a general client bank account, a designated client bank account or a designated client fund account (see CASS 7A.2.1 G (Failure of the authorised firm: primary pooling event)). The requirements of CASS 7.4.11AR (2) and CASS 7.4.11AR (3) apply for each type of client bank account.
CASS 7.4.13
01/11/2007
FCA
A designated client fund account may be used for a client only where that client has consented to the use of that account and all other designated client fund accounts which may be pooled with it. For example, a client who consents to the use of bank A and bank B should have his money held in a different designated client fund account at bank B from a client who has consented to the use of banks B and C.

Payment of client money into a client bank account

CASS 7.4.14
01/01/2009
FCA
Two approaches that a firm can adopt in discharging its obligations under the client money segregation requirements are:
(1) the 'normal approach'; or
(2) the 'alternative approach'.
CASS 7.4.15
01/04/2013
FCA
A firm that does not adopt the normal approach must first send a written confirmation to the FCA from the firm's auditor that the firm has in place systems and controls which are adequate to enable it to operate another approach effectively.
CASS 7.4.16
01/11/2007
FCA
The alternative approach would be appropriate for a firm that operates in a multi-product, multi-currency environment for which adopting the normal approach would be unduly burdensome and would not achieve the client protection objective. Under the alternative approach, client money is received into and paid out of a firm's own bank accounts; consequently the firm should have systems and controls that are capable of monitoring the client money flows so that the firm can comply with its obligations to perform reconciliations of records and accounts (see CASS 7.6.2 R). A firm that adopts the alternative approach will segregate client money into a client bank account on a daily basis, after having performed a reconciliation of records and accounts of the entitlement of each client for whom the firm holds client money with the records and accounts of the client money the firm holds in client bank accounts and client transaction accounts to determine what the client money requirement was at the close of the previous business day.
CASS 7.4.17
01/11/2007
FCA
Under the normal approach, a firm that receives client money should either:
(1) pay it promptly, and in any event no later than the next business day after receipt, into a client bank account; or
(2) pay it out in accordance with the rule regarding the discharge of a firm's fiduciary duty to the client (see CASS 7.2.15 R).
CASS 7.4.18
06/04/2010
FCA
Under the alternative approach, a firm that receives client money should:
(1) 
(a) pay any money to or on behalf of clients out of its own account; and
(b) perform a reconciliation of records and accounts required under CASS 7.6.2 R (Records and accounts), and where relevant SYSC 4.1.1 R (General requirements) and SYSC 6.1.1 R (Compliance), adjust the balance held in its client bank accounts and then segregate the money in the client bank account until the calculation is re-performed on the next business day; or
(2) pay it out in accordance with the rule regarding the discharge of a firm's fiduciary duty to the client (see CASS 7.2.15 R).
CASS 7.4.19
01/11/2007
FCA
A firm that adopts the alternative approach may:
(1) receive all client money into its own bank account;
(2) choose to operate the alternative approach for some types of business (for example, overseas equities transactions) and operate the normal approach for other types of business (for example, contingent liability investments) if the firm can demonstrate that its systems and controls are adequate (see CASS 7.4.15 R); and
(3) use an historic average to account for uncleared cheques (see paragraph 4 of CASS 7 Annex 1).
CASS 7.4.20
01/01/2009
FCA
Pursuant to the client money segregation requirements, a firm should ensure that any money other than client money deposited in a client bank account is promptly paid out of that account unless it is a minimum sum required to open the account, or to keep it open.
CASS 7.4.21
01/11/2007
FCA
If it is prudent to do so to ensure that client money is protected, a firm may pay into a client bank account money of its own, and that money will then become client money for the purposes of this chapter.

Automated transfers

CASS 7.4.22
01/01/2009
FCA
Pursuant to the client money segregation requirements, a firm operating the normal approach that receives client money in the form of an automated transfer should take reasonable steps to ensure that:
(1) the money is received directly into a client bank account; and
(2) if money is received directly into the firm's own account, the money is transferred into a client bank account promptly, and in any event, no later than the next business day after receipt.

Mixed remittance

CASS 7.4.23
01/01/2009
FCA
Pursuant to the client money segregation requirements, a firm operating the normal approach that receives a mixed remittance (that is part client money and part other money) should:
(1) pay the full sum into a client bank account promptly, and in any event, no later than the next business day after receipt; and
(2) pay the money that is not client money out of the client bank account promptly, and in any event, no later than one business day of the day on which the firm would normally expect the remittance to be cleared.

Appointed representatives, tied agents, field representatives and other agents

CASS 7.4.24
01/01/2009
FCA
(1) Pursuant to the client money segregation requirements, a firm operating the normal approach should establish and maintain procedures to ensure that client money received by its appointed representatives, tied agents, field representatives or other agents is:
(a) paid into a client bank account of the firm promptly, and in any event, no later than the next business day after receipt; or
(b) forwarded to the firm, or in the case of a field representative forwarded to a specified business address of the firm, so as to ensure that the money arrives at the specified business address promptly, and in any event, no later than the close of the third business day.
(2) For the purposes of 1(b), client money received on business day one should be forwarded to the firm or specified business address of the firm promptly, and in any event, no later than the next business day after receipt (business day two) in order for it to reach that firm or specified business address by the close of the third business day. Procedures requiring the client money in the form of a cheque to be sent to the firm or the specified business address of the firm by first class post promptly, and in any event, no later than the next business day after receipt, would be in line with 1(b).
CASS 7.4.25
01/11/2007
FCA
The firm should ensure that its appointed representatives, tied agents, field representatives or other agents keep client money separately identifiable from any other money (including that of the firm) until the client money is paid into a client bank account or sent to the firm.
CASS 7.4.26
01/11/2007
FCA
A firm that operates a number of small branches, but holds or accounts for all client money centrally, may treat those small branches in the same way as appointed representatives and tied agents.

Client entitlements

CASS 7.4.27
01/01/2009
FCA
Pursuant to the client money segregation requirements, a firm operating the normal approach that receives outside the United Kingdom a client entitlement on behalf of a client should pay any part of it which is client money:
(1) to, or in accordance with, the instructions of the client concerned; or
(2) into a client bank account promptly, and in any event, no later than five business days after the firm is notified of its receipt.
CASS 7.4.28
01/01/2009
FCA
Pursuant to the client money segregation requirements, a firm operating the normal approach should allocate a client entitlement that is client money to the individual client promptly and, in any case, no later than ten business days after notification of receipt.

Money due to a client from a firm

CASS 7.4.29
01/01/2009
FCA
Pursuant to the client money segregation requirements, a firm operating the normal approach that is liable to pay money to a client should promptly, and in any event no later than one business day after the money is due and payable, pay the money:
(1) to, or to the order of, the client; or
(2) into a client bank account.

Segregation in different currency

CASS 7.4.30
01/11/2007
FCA
A firm may segregate client money in a different currency from that of receipt. If it does so, the firm must ensure that the amount held is adjusted each day to an amount at least equal to the original currency amount (or the currency in which the firm has its liability to its clients, if different), translated at the previous day's closing spot exchange rate.
CASS 7.4.31
01/11/2007
FCA
The rule on segregation of client money in a different currency (CASS 7.4.30 R) does not apply where the client has instructed the firm to convert the money into and hold it in a different currency.

Commodity Futures Trading Commission Part 30 exemption order

CASS 7.4.32
01/07/2014
[deleted]
CASS 7.4.33
01/07/2014
[deleted]
CASS 7.4.34
01/07/2014
[deleted]
CASS 7.4.35
01/07/2014
[deleted]
CASS 7.4.36
01/07/2014
FCA
CASS 12 contains provisions which are relevant to a firm conducting business pursuant to the Part 30 exemption order.

CASS 7.5 Transfer of client money to a third party

CASS 7.5.1
01/07/2014
FCA
This section sets out the requirements a firm must comply with when it allows another person to hold client money, other than under CASS 7.4.1 R, without discharging its fiduciary duty owed to that client. Such circumstances arise when, for example, a firm passes client money to a clearing house in the form of margin for the firm's obligations to the clearing house that are referable to transactions undertaken by the firm for the relevant clients. They may also arise when a firm passes client money to an intermediate broker for contingent liability investments in the form of initial or variation margin on behalf of a client. Similarly, this section applies where a firm allows a broker to hold client money in respect of the firm's client's non-margined transactions, again without the firm discharging its fiduciary duty to that client. In all cases, the firm remains responsible for that client's client equity balance held at the intermediate broker until the contract is terminated and all of that client's positions at that broker closed. If a firm wishes to discharge itself from its fiduciary duty, it should do so in accordance with the rule regarding the discharge of a firm's fiduciary duty to the client (CASS 7.2.15 R).
CASS 7.5.2
01/07/2014
FCA
A firm may allow another person, such as an exchange, a clearing house or an intermediate broker, to hold or control client money, but only if:
(1) the firm allows that person to hold the client money:
(a) for the purpose of one or more transactions for a client through or with that person; or
(b) to meet a client's obligation to provide collateral for a transaction (for example, an initial margin requirement for a contingent liability investment); and
(2) in the case of a retail client, that client has been notified that the firm may allow the other personto hold its client money.
CASS 7.5.2A
01/07/2014
FCA
Client money that a firm allows another person to hold under CASS 7.5.2 R:
(1) should only be held for transactions which are likely to occur (and for which the other person needs to receive client money) or have recently settled (and such that the other person has received client money); and
(2) should be recorded in client transaction accounts by that other person.
CASS 7.5.3
01/07/2014
FCA
Apart from client money held by a firm in an individual client account or an omnibus client account at an authorised central counterparty, a firm should not hold excess client money in its client transaction accounts.

CASS 7.6 Records, accounts and reconciliations

Records and accounts

CASS 7.6.-1
01/07/2014
FCA
Where a firm establishes one or more sub-pools, the provisions of CASS 7.6 (Records, accounts and reconciliations) shall be read as applying separately to the firm's general pool and each sub-pool in line with CASS 7.19.3 R and CASS 7.19.4 R.
CASS 7.6.1
01/11/2007
FCA
A firm must keep such records and accounts as are necessary to enable it, at any time and without delay, to distinguish client money held for one client from client money held for any other client, and from its own money.
[Note: article 16(1)(a) of the MiFID implementing Directive]
CASS 7.6.2
01/11/2007
FCA
A firm must maintain its records and accounts in a way that ensures their accuracy, and in particular their correspondence to the client money held for clients.
[Note: article 16(1)(b) of the MiFID implementing Directive]

Client entitlements

CASS 7.6.3
06/04/2010
FCA
Pursuant to CASS 7.6.2 R (Records and accounts), and where relevant SYSC 4.1.1 R (General requirements)and SYSC 6.1.1 R (Compliance), a firm should take reasonable steps to ensure that it is notified promptly of any receipt of client money in the form of a client entitlement.

Record keeping

CASS 7.6.4
01/07/2014
FCA
Unless otherwise stated, a firm must ensure that any record made under the client money rules is retained for a period of five years starting from the later of:
(1) the date it was created; and
(2) (if it has been modified since the date it was created), the date it was most recently modified.
CASS 7.6.5
01/11/2007
FCA
A firm should ensure that it makes proper records, sufficient to show and explain the firm's transactions and commitments in respect of its client money.

Internal reconciliations of client money balances

CASS 7.6.6
01/04/2013
FCA
(1) Carrying out internal reconciliations of records and accounts of the entitlement of each client for whom the firm holds client money with the records and accounts of the client money the firm holds in client bank accounts and client transaction accounts should be one of the steps a firm takes to satisfy its obligations under CASS 7.6.2 R, and where relevant SYSC 4.1.1 R and SYSC 6.1.1 R.
(2) A firm should perform such internal reconciliations:
(a) as often as is necessary; and
(b) as soon as reasonably practicable after the date to which the reconciliation relates;
to ensure the accuracy of the firm's records and accounts.
(3) The standard method of internal client money reconciliation sets out a method of reconciliation of client money balances that the FCA believes should be one of the steps that a firm takes when carrying out internal reconciliations of client money.

Records

CASS 7.6.7
06/04/2010
FCA
(1) A firm must make records, sufficient to show and explain the method of internal reconciliation of client money balances under CASS 7.6.2 R used, and if different from the standard method of internal client money reconciliation, to show and explain that:
(a) the method of internal reconciliation of client money balances used affords an equivalent degree of protection to the firm's clients to that afforded by the standard method of internal client money reconciliation; and
(b) in the event of a primary pooling event or a secondary pooling event, the method used is adequate to enable the firm to comply with the client money distribution rules.
(2) A firm must make these records on the date it starts using a method of internal reconciliation of client money balances and must keep it for a period of five years after ceasing to use it.
CASS 7.6.8
01/04/2013
FCA
A firm that does not use the standard method of internal client money reconciliation must first send a written confirmation to the FCA from the firm's auditor that the firm has in place systems and controls which are adequate to enable it to use another method effectively.

Reconciliations with external records

CASS 7.6.9
01/11/2007
FCA
A firm must conduct, on a regular basis, reconciliations between its internal accounts and records and those of any third parties by whom client money is held.
[Note: article 16(1)(c) of the MiFID implementing Directive]

Frequency of external reconciliations

CASS 7.6.10
01/11/2007
FCA
(1) A firm should perform the required reconciliation of client money balances with external records:
(a) as regularly as is necessary; and
(b) as soon as reasonably practicable after the date to which the reconciliation relates;
to ensure the accuracy of its internal accounts and records against those of third parties by whom client money is held.
(2) In determining whether the frequency is adequate, the firm should consider the risks which the business is exposed, such as the nature, volume and complexity of the business, and where and with whom the client money is held.

Method of external reconciliations

CASS 7.6.11
01/04/2013
FCA
A method of reconciliation of client money balances with external records that the FCA believes is adequate is when a firm compares:
(1) the balance on each client bank account as recorded by the firm with the balance on that account as set out on the statement or other form of confirmation issued by the bank with which those accounts are held; and
(2) the balance, currency by currency, on each client transaction account as recorded by the firm, with the balance on that account as set out in the statement or other form of confirmation issued by the person with whom the account is held;
and identifies any discrepancies between them.
CASS 7.6.12
01/11/2007
FCA
Any approved collateral held in accordance with the client money rules must be included within this reconciliation.

Reconciliation discrepancies

CASS 7.6.13
01/11/2007
FCA
When any discrepancy arises as a result of a firm's internal reconciliations, the firm must identify the reason for the discrepancy and ensure that:
(1) any shortfall is paid into a client bank account by the close of business on the day that the reconciliation is performed; or
(2) any excess is withdrawn within the same time period (but see CASS 7.4.20 G and CASS 7.4.21 R).
CASS 7.6.14
01/11/2007
FCA
When any discrepancy arises as a result of the reconciliation between a firm's internal records and those of third parties that hold client money, the firm must identify the reason for the discrepancy and correct it as soon as possible, unless the discrepancy arises solely as a result of timing differences between the accounting systems of the party providing the statement or confirmation and that of the firm.
CASS 7.6.15
01/11/2007
FCA
While a firm is unable to resolve a difference arising from a reconciliation between a firm's internal records and those of third parties that hold client money, and one record or a set of records examined by the firm during its reconciliation indicates that there is a need to have a greater amount of client money or approved collateral than is in fact the case, the firm must assume, until the matter is finally resolved, that the record or set of records is accurate and pay its own money into a relevant account.

Notification requirements

CASS 7.6.16
01/04/2013
FCA
A firm must inform the FCA in writing without delay:
(1) if it has not complied with, or is unable, in any material respect, to comply with the requirements in CASS 7.6.1 R, CASS 7.6.2 R or CASS 7.6.9 R;
(2) if having carried out a reconciliation it has not complied with, or is unable, in any material respect, to comply with CASS 7.6.13 R to CASS 7.6.15 R.

Audit of compliance with the MiFID client money rules

CASS 7.6.17
01/04/2013
FCA
Firms are reminded that the auditor of the firm has to confirm in the report submitted to the FCA under SUP 3.10 (Duties of auditors: notification and report on client assets) that the firm has maintained systems adequate to enable it to comply with the client money rules.
CASS 7.6.18
01/04/2013
FCA
Firms that do not adopt the normal approach are reminded that the firm's auditor must confirm to the FCA in writing that the firm has in place systems and controls which are adequate to enable it to operate the alternative approach effectively (see CASS 7.4.15 R).
CASS 7.6.19
01/04/2013
FCA
Firms that do not use the standard method of internal client money reconciliation are reminded that the firm's auditor must confirm to the FCA in writing that the firm has in place systems and controls which are adequate to enable it to use another method effectively (see CASS 7.6.8 R).

CASS 7.7 Statutory trust

CASS 7.7.1
01/04/2013
FCA
Section 137B(1) of the Act (Miscellaneous ancillary matters) provides that rules may make provision which result in client money being held by a firm on trust (England and Wales and Northern Ireland) or as agent (Scotland only). This section creates a fiduciary relationship between the firm and its client under which client money is in the legal ownership of the firm but remains in the beneficial ownership of the client. In the event of failure of the firm, costs relating to the distribution of client money may have to be borne by the trust.

Requirement

CASS 7.7.2
01/07/2014
FCA
Subject to CASS 7.7.3 R in respect of a trustee firm, a firm receives and holds client money as trustee on the following terms:
(1) for the purposes of and on the terms of the client money rules and the client money distribution rules;
(2) 
(a) where a firm maintains only a general pool of client money, subject to (4), for the clients (other than clients which are insurance undertakings when acting as such with respect to client money received in the course of insurance mediation activity and that was opted in to this chapter) for whom that money is held, according to their respective interests in it;
(b) where a firm has established one or more pools of client money, subject to (4):
(i) the general pool is held for all the clients of the firm for whom the firm holds client money (other than clients which are insurance undertakings when acting as such with respect to client money received in the course of insurance mediation activity and that was opted in to this chapter) according to their respective interests in it; and
(ii) each sub-pool is for the clients of the firm who are beneficiaries of the sub-pool in question accordance with CASS 7.19.6R (2), according to their respective interests in it;
(3) after all valid claims in (2) have been met, for clients which are insurance undertakings with respect of client money received in the course of insurance mediation activity according to their respective interests in it;
(4) for the payment of the costs properly attributable to the distribution of the client money in accordance with (2) if such distribution takes place following the failure of the firm; and
(5) after all valid claims and costs under (2) to (4) have been met, for the firm itself.
CASS 7.7.3
01/10/2014
FCA
A trustee firm which is subject to the client money rules by virtue of CASS 7.1.1AR (2) receives and holds client money as trustee on the terms in CASS 7.7.2 R, subject to its obligations to hold client money as trustee under the relevant instrument of trust.
CASS 7.7.4
01/07/2014
FCA
If a trustee firm holds client money the firm should follow the provisions in CASS 7.1.15E R to CASS 7.1.15L G.

CASS 7.8 Notification and acknowledgement of trust

Banks

CASS 7.8.1
01/11/2007
FCA
(1) When a firm opens a client bank account, the firm must give or have given written notice to the bank requesting the bank to acknowledge to it in writing that:
(a) all money standing to the credit of the account is held by the firm as trustee (or if relevant, as agent) and that the bank is not entitled to combine the account with any other account or to exercise any right of set-off or counterclaim against money in that account in respect of any sum owed to it on any other account of the firm; and
(b) the title of the account sufficiently distinguishes that account from any account containing money that belongs to the firm, and is in the form requested by the firm.
(2) In the case of a client bank account in the United Kingdom, if the bank does not provide the required acknowledgement within 20 business days after the firm dispatched the notice, the firm must withdraw all money standing to the credit of the account and deposit it in a client bank account with another bank as soon as possible.

Exchanges, clearing houses, intermediary brokers or OTC counterparties

CASS 7.8.2
01/05/2013
FCA
(1) A firm which undertakes any contingent liability investment for clients through an exchange, clearing house, intermediate broker or OTC counterparty must, before the client transaction account is opened with the exchange, clearing house, intermediate broker or OTC counterparty:
(a) notify the person with whom the account is to be opened that the firm is under an obligation to keep client money separate from the firm's own money, placing client money in a client bank account;
(b) instruct the person with whom the account is to be opened that any money paid to it in respect of that transaction is to be credited to the firm's client transaction account; and
(c) require the person with whom the account is to be opened to acknowledge in writing that the firm's client transaction account is not to be combined with any other account, nor is any right of set-off to be exercised by that person against money credited to the client transaction account in respect of any sum owed to that person on any other account.
(2) If the exchange, clearing house, intermediate broker or OTC counterparty does not provide the required acknowledgement within 20 business days of the dispatch of the notice and instruction, the firm must cease using the client transaction account with that exchange, clearing house, intermediate broker or OTC counterparty and arrange as soon as possible for the transfer or liquidation of any open positions and the repayment of any money.
31/12/2008 is the last day this material was in force Not in force until 01/06/2015 Not in force until 01/06/2015 Not in force until 01/06/2015 Not in force until 01/06/2015 Not in force until 01/06/2015 Not in force until 01/06/2015 Not in force until 01/06/2015 Not in force until 01/06/2015 Not in force until 01/06/2015

CASS 7.19 Clearing member client money sub-pools

CASS 7.19.1
01/07/2014
FCA
(1) Under CASS 7.7.2R (2), a firm acts as trustee for all client money received or held by it for the benefit of the clients for whom that client money is held, according to their respective interests in it.
(2) A firm that is also a clearing member of an authorised central counterparty may wish to segregate client money specifically for the benefit of a group of clients who have chosen to clear positions through a net margined omnibus client account maintained by the firm with that authorised central counterparty, where that segregation might facilitate the porting of client positions recorded in that net margined omnibus client account. To segregate client money (that would otherwise be held in the general pool) for a specific group of clients clearing positions through a particular net margined omnibus client account, a clearing member firm may, in accordance with these rules, create a sub-pool of client money.
(3) Upon the occurrence of a primary pooling event, the client money for:
(a) the general pool, should be distributed in accordance with CASS 7A to the clients for whom the firm receives or holds client money in that general pool; and
(b) a sub-pool, should either be:
(i) transferred to facilitate porting; or
(ii) distributed to the clients who are beneficiaries of that sub-pool, according to their respective interests under CASS 7A.2.4R (2)(a).
(4) All client money is received or held by the firm as trustee for the clients of the firm. However, a clearing member of an authorised central counterparty who clears client positions through a net margined omnibus client account may organise its affairs (with the consent of the relevant clients) in such a way that those clients need not share in the general pool of client money following a primary pooling event, save to the extent that such clients otherwise have an interest in the general pool.
CASS 7.19.2
01/07/2014
FCA
Where a firm creates a sub-pool for a particular net margined omnibus client account, it must not clear positions through that omnibus client account for clients who are not beneficiaries of that sub-pool.

Internal controls

CASS 7.19.3
01/07/2014
FCA
A firm wishing to establish a sub-pool must establish and maintain adequate internal controls necessary to comply with the firm's obligations under CASS 7 for the general pool and each sub-pool that it may establish.

Records

CASS 7.19.4
01/07/2014
FCA
Where a firm establishes one or more sub-pools, CASS 7.6 (Records, accounts and reconciliations) shall be read as applying separately to the firm's general pool and each sub-pool.
CASS 7.19.5
01/07/2014
FCA
A firm that establishes one or more sub-pools must establish and maintain adequate internal controls and records in accordance with CASS 7.6 (Records, accounts and reconciliations) to conduct internal and external reconciliations for each sub-pool and the general pool individually.
CASS 7.19.6
01/07/2014
FCA
(1) The records maintained for a sub-pool under CASS 7.19.4 R must identify all the client beneficiaries of that sub-pool.
(2) The beneficiaries of each sub-pool are those clients:
(a) from whom the firm has received a signed sub-pool disclosure document in accordance with CASS 7.19.11 R;
(b) for whom the firm maintains, previously maintained or is in the process of establishing a margined transaction(s) in the relevant net margined omnibus client account at the authorised central counterparty; and
(c) to whom any client equity balance or other client money is required to be segregated for the client by the firm in respect of the margined transactions under (2)(b) from that sub-pool.
CASS 7.19.7
01/07/2014
FCA
(1) For each sub-pool that the firm establishes, it must maintain a record of:
(a) the name of the sub-pool;
(b) the particular net margined omnibus client account at an authorised central counterparty to which the sub-pool relates;
(c) each client bank account and each client transaction account (other than the net margined omnibus client account) maintained for the sub-pool, including the unique identifying reference or descriptor under CASS 7.19.13R (2); and
(d) the applicable sub-pool disclosure document for the sub-pool.
CASS 7.19.8
01/07/2014
FCA
The firm must maintain an up-to-date list of all the sub-pools it has created.

Sub-pool disclosure document

CASS 7.19.9
01/07/2014
FCA
(1) A firm wishing to establish a sub-pool must prepare a sub-pool disclosure document for each sub-pool.
(2) The sub-pool disclosure document for each sub-pool must:
(a) identify the sub-pool by name, as stated in its records under CASS 7.19.7 R, the net margined omnibus client account and the authorised central counterparty to which the sub-pool disclosure document relates;
(b) contain a statement that the client consents to the firm receiving and holding the client's client money in the sub-pool;
(c) contain a statement that, in the event of the failure of the firm, the firm is directed by the client to use any client money held by the firm in the sub-pool to facilitate the porting of the positions recorded in that net margined omnibus client account; and
(d) a statement reminding the client that, in the event of the failure of the firm, if porting is not effected or if porting is effected but any money in the sub-pool is not used to facilitate porting, the client beneficiaries of the sub-pool will be entitled to a distribution of any client money held for that sub-pool in line with CASS 7A. However, the client beneficiaries will not have a claim on any other pool of client money, except to the extent that the client is a beneficiary of another pool.
CASS 7.19.10
01/07/2014
FCA
In preparing a sub-pool disclosure document under CASS 7.19.9R (1), a firm may use the template in CASS 7 Annex 6.
CASS 7.19.11
01/07/2014
FCA
(1) Before receiving or holding client money for a client for a sub-pool, a firm must:
(a) provide to the client a copy of the sub-pool disclosure document applicable to that sub-pool; and
(b) obtain a signed copy of that sub-pool disclosure document from the client.
(2) A firm must provide the beneficiary of a sub-pool with a copy of its signed sub-pool disclosure document applicable to that sub-pool upon the beneficiary's request.

Segregation and operation of sub-pools

CASS 7.19.12
01/07/2014
FCA
Where a firm establishes one or more sub-pools, CASS 7.4 (Segregation of client money) shall be read as applying separately to the firm's general pool and each sub-pool.
CASS 7.19.13
01/07/2014
FCA
(1) A firm must not hold client money for a sub-pool in a client bank account or a client transaction account used for holding client money for any other sub-pool or the general pool.
(2) A firm that establishes a sub-pool must ensure that the name of each client bank account and each client transaction account (other than the net margined omnibus client account) maintained for that sub-pool includes a unique identifying reference or descriptor that enables the account to be identified with that sub-pool.
(3) Where a client of the firm is a beneficiary of the general pool and wishes to become a beneficiary of a sub-pool, the client in question shall become a beneficiary of the relevant sub-pool when :
(a) the firm has obtained the signed sub-pool disclosure document from that client in accordance with CASS 7.19.11R (1); and
(b) the firm has either:
(i) transferred the relevant amount of client money for that client from a client bank account maintained for the general pool to a client bank account maintained for the relevant sub-pool; or
(ii) if the firm is not making a transfer of client money from the general pool, when it has received that client's money in a client bank account maintained for the relevant sub-pool.
(4) Where a client of the firm is a beneficiary of the general pool and wishes to become a beneficiary of a sub-pool, the firm must ensure that it does not transfer client money from a client bank account maintained for the general pool to a client bank account maintained for a sub-pool in accordance with CASS 7.19.13R (3)(b)(i), unless the amount of client money held for the general pool is sufficient, immediately after that transfer, to satisfy the firm's client money obligations to the remaining beneficiaries of the general pool.
(5) A client of the firm who is a beneficiary of a sub-pool ceases to be a beneficiary of that sub-pool when:
(a) the firm has settled the amount owing to that client for all of the margined transactions cleared through the related net margined omnibus client account and no longer holds any client money for that client in that sub-pool, and so CASS 7.19.6R (2)(b) and CASS 7.19.6R (2)(c) no longer apply for that client; or
(b) the firm has complied with (i) or (ii), and in either case (iii):
(i) the firm has received a written instruction from the client stating that the client no longer wishes to have its positions cleared through the net margined omnibus client account or its client money held in that sub-pool, or the firm has notified the client under CASS 7.19.18 R that it is making a material change to a sub-pool; or
(ii) the firm has closed or moved that client's positions to an account other than the net margined omnibus client account referable to that sub-pool; and
(iii) the firm has either transferred the relevant amount of client money for that client from a client bank account maintained for the relevant sub-pool to a client bank account maintained by the firm for the general pool (or, if applicable, another sub-pool), or transferred the amount owing to that client for all of the margined transactions cleared through the related net margined omnibus client account and no longer holds any client money for that client in that sub-pool.
(6) In relation to the transfer of client money under CASS 7.19.13R (5)(b)(iii), a firm must ensure that it does not transfer client money from a client bank account maintained for a sub-pool, unless the amount of client money held for the sub-pool is sufficient, immediately after that transfer, to satisfy the firm's client money obligations to the remaining beneficiaries of that sub-pool.
CASS 7.19.14
01/07/2014
FCA
A firm that receives client money to be credited in part to the general pool or one sub-pool and in part to another sub-pool must:
(1) take the necessary steps to ensure that the full sum is paid directly into a client bank account maintained for the general pool; and
(2) promptly, and in any event no later than one business day after receipt, pay the money that is not client money for the general pool out of that client bank account and into a client bank account maintained for the appropriate sub-pool.
CASS 7.19.15
01/07/2014
FCA
(1) If a primary pooling event occurs before client money is transferred from a client bank account maintained for the general pool to a client bank account maintained for the appropriate sub-pool in accordance with CASS 7.19.14R (2), the amount in question will not form part of that sub-pool, including for the purposes of .
(2) If a primary pooling event occurs before client money is transferred from a client bank account maintained for a sub-pool to a client bank account maintained for the general pool or another sub-pool in accordance with CASS 7.19.13R (5), the amount in question will not form part of the general pool or that other sub-pool, including for the purposes of CASS 7A.2.4R (1), but will remain part of the original sub-pool.
CASS 7.19.16
01/07/2014
FCA
A client for whom a firm receives or holds client money for a sub-pool has no claim to or interest in client money received or held for the general pool or any other sub-pool unless:
(1) that client is a beneficiary of that other sub-pool; or
(2) the firm receives or holds client money for that client for other business which does not relate to any sub-pool (and thus the client is a beneficiary of the firm's general pool).
CASS 7.19.17
01/07/2014
FCA
A client for whom a firm receives or holds client money in more than one pool as described in CASS 7.19.16R (1) and/or CASS 7.19.16R (2) has an interest in a distribution from each such pool, and each interest is separate and distinct.

Material changes to sub-pools

CASS 7.19.18
01/07/2014
FCA
Before making a material change to a sub-pool, a firm must:
(1) notify the then current beneficiaries of that sub-pool in writing, not less than two months before the date on which the firm intends the change to take effect; and
(2) include in the notification an explanation of the consequences for the beneficiaries of the proposed change and the options available to them, such as the option of a beneficiary of the affected sub-pool to cease to be a beneficiary of that sub-pool and to become a beneficiary of the firm's general pool or, if applicable, another sub-pool.
CASS 7.19.19
01/07/2014
FCA
A firm should keep in mind its obligations under CASS 7.19.11R (1)(b) (before receiving or holding client money for a client in a sub-pool, a firm must obtain a signed copy of the sub-pool disclosure document from the client) when making a material change to a sub-pool. A firm is also reminded of the conditions under CASS 7.19.13R (5)(b) (when a client of the firm who is a beneficiary of a sub-pool ceases to be a beneficiary of that sub-pool) if a material change proposed to a sub-pool results in a client ceasing to be a beneficiary of that sub-pool.
CASS 7.19.20
01/07/2014
FCA
The FCA would normally consider the dissolution of a sub-pool, such that the firm no longer operates the sub-pool or no longer uses the relevant net margined omnibus client account or transfers the business to another authorised central counterparty, to be examples of material changes to a sub-pool.
CASS 7.19.21
01/07/2014
FCA
Before materially changing a sub-pool, a firm must provide a copy of the notice provided to clients under CASS 7.19.18 R R to the FCA not less than two months before the date on which the firm intends the change to take place.

Notifications

CASS 7.19.22
01/07/2014
FCA
A firm that wishes to establish a sub-pool of client money must notify the FCA in writing not less than two months before the date on which the firm intends to receive or hold client money for that sub-pool.
CASS 7.19.23
01/07/2014
FCA
Upon request, a firm must deliver to the FCA a copy of the sub-pool disclosure document for any sub-pool established by the firm.
CASS 7.19.24
01/07/2014
FCA
A firm must inform the FCA in writing, without delay, if it has not complied, or is unable to comply with the requirements in CASS 7.19.11 R or the requirements in CASS 7.19.18 R.

Record-keeping

CASS 7.19.25
01/07/2014
FCA
The records maintained under this section, including the sub-pool disclosure documents, are a record of the firm that must be kept in a durable medium for at least five years following the date on which client money was last held by the firm for a sub-pool to which those records or the sub-pool disclosure document applied.

CASS 7 Annex 1 Annex 1

01/04/2014
FCA
As explained in CASS 7.6.6 G, in complying with its obligations under CASS 7.6.2 R (Records and accounts), and where relevant SYSC 4.1.1 R (General organisational requirements) and SYSC 6.1.1 R (Compliance), a firm should carry out internal reconciliations of records and accounts of client money the firm holds in client bank accounts and client transaction accounts. This Annex sets out a method of reconciliation that the FCA believes is appropriate for these purposes (the standard method of internal client money reconciliation).
 1. Each business day, a firm that adopts the normal approach (see CASS 7.4.17 G) should check whether its client money resource, being the aggregate balance on the firm's client bank accounts, as at the close of business on the previous business day, was at least equal to the client money requirement, as defined in paragraph 6 below, as at the close of business on that day.
 2. Each business day, a firm that adopts the alternative approach (see CASS 7.4.18 G) should ensure that its client money resource, being the aggregate balance on the firm's client bank accounts, as at the close of business on that business day is at least equal to the client money requirement, as defined in paragraph 6 below, as at the close of business on the previous business day.
 3. No excess or shortfall should arise when adopting the alternative approach.
 4. If a firm is operating the alternative approach and draws a cheque on its own bank account, it will be expected to account for those cheques that have not yet cleared when performing its reconciliations of records and accounts under paragraph 2. An historic average estimate of uncleared cheques may be used to satisfy this obligation (see CASS 7.4.19G (3)).
 5. For the purposes of performing its reconciliations of records and accounts under paragraphs 1 or 2, a firm should use the values contained in its accounting records, for example its cash book, rather than values contained in statements received from its banks and other third parties.
Client money requirement
 6. The client money requirement is either(1) or (2), except that for a firm whose designated investment business includes operating an electronic system in relation to lending it is only (2):
 (1) (subject to paragraph 18) the sum of, for all clients:
 (a) the individual client balances calculated in accordance with paragraph 7, excluding:
 (i) individual client balances which are negative (that is, debtors); and
 (ii) clients' equity balances; and
 (b) the total margined transaction requirement calculated in accordance with paragraph 14;
 (2) the sum of:
 (a) for each client bank account:
 (i) the amount which the firm's records show as held on that account; and
 (ii) an amount that offsets each negative net amount which the firm's records show attributed to that account for an individual client; and
 (b) the total margined transaction requirement calculated in accordance with paragraph 14.
General transactions
7. The individual client balance for each client should be calculated in accordance with this table:
Individual client balance calculation
 Free money (no trades) andA
 sale proceeds due to the client: 
 (a)in respect of principal deals when the client has delivered the designated investments; andB
 (b)in respect of agency deals, when either: 
  (i)the sale proceeds have been received by the firm and the client has delivered the designated investments; orC1
  (ii)the firm holds the designated investments for the client; andC2
 the cost of purchases:
 (c)in respect of principal deals, paid for by the client but the firm has not delivered the designated investments to the client; andD
 (d)in respect of agency deals, paid for by the client when either: 
  (i)the firm has not remitted the money to, or to the order of, the counterparty; orE1
  (ii)the designated investments have been received by the firm but have not been delivered to the client;E2
Less
 money owed by the client in respect of unpaid purchases by or for the client if delivery of those designated investments has been made to the client; andF
 Proceeds remitted to the client in respect of sales transactions by or for the client if the client has not delivered the designated investments.G
Individual Client Balance 'X' = (A+B+C1+C2+D+E1+E2)-F-G X

 8. A firm should calculate the individual client balance using the contract value of any client purchases or sales.
 9. A firm may choose to segregate designated investments instead of the value identified in paragraph 7 (except E1) if it ensures that the designated investments are held in such a manner that the firm cannot use them for its own purposes.
 10. Segregation in the context of paragraph 9 can take many forms, including the holding of a safe custody investment in a nominee name and the safekeeping of certificates evidencing title in a fire resistant safe. It is not the intention that all the custody rules in the custody chapter should be applied to designated investments held in the course of settlement.
 11. In determining the client money requirement under paragraph 6, a firm need not include money held in accordance with CASS 7.2.8 R (Delivery versus payment transaction).
 12. In determining the client money requirement under paragraph 6, a firm:
 (1) should include dividends received and interest earned and allocated;
 (2) may deduct outstanding fees, calls, rights and interest charges and other amounts owed by the client which are due and payable to the firm (see CASS 7.2.9 R);
 (3) need not include client money in the form of client entitlements which are not required to be segregated (see CASS 7.4.27 G) nor include client money forwarded to the firm by its appointed representatives, tied agents, field representatives and other agents, but not received (see CASS 7.4.24 G);
 (4) should take into account any client money arising from CASS 7.6.13 R (Reconciliation discrepancies); and
 (5) should include any unallocated client money.
Equity balance
 13. A firm's equity balance, whether with an exchange, intermediate broker or OTC counterparty, is the amount which the firm would be liable to pay to the exchange, intermediate broker or OTC counterparty (or vice-versa) in respect of the firm's margined transactions if each of the open positions of the firm's clients was liquidated at the closing or settlement prices published by the relevant exchange or other appropriate pricing source and the firm's account with the exchange, intermediate broker or OTC counterparty is closed.
Margined transaction requirement
 14. The total margined transaction requirement is:
 (1) the sum of each of the client's equity balances which are positive;
Less
 (2) the proportion of any individual negative client equity balance which is secured by approved collateral; and
 (3) the net aggregate of the firm's equity balance (negative balances being deducted from positive balances) on transaction accounts for customers with exchanges, clearing houses, intermediate brokers and OTC counterparties.
 15. To meet a shortfall that has arisen in respect of the requirement in paragraph 6(1)(b) or 6(2)(b), a firm may utilise its own approved collateral provided it is held on terms specifying when it is to be realised for the benefit of clients, it is clearly identifiable from the firm's own property and the relevant terms are evidenced in writing by the firm. In addition, the proceeds of the sale of that collateral should be paid into a client bank account.
 16. If a firm's total margined transaction requirement is negative, the firm should treat it as zero for the purposes of calculating its client money requirement.
 17. The terms 'client equity balance' and 'firm's equity balance' in paragraph 13 refer to cash values and do not include non-cash collateral or other designated investments held in respect of a margined transaction.
 17A. A firm with a Part 30 exemption order which also operates an LME bond arrangement for the benefit of US-resident investors, should exclude the client equity balances for transactions undertaken on the London Metal Exchange on behalf of those US-resident investors from the calculation of the margined transaction requirement.
Reduced client money requirement option
 18.
 (1) When, in respect of a client, there is a positive individual client balance and a negative client equity balance, a firm may offset the credit against the debit and hence have a reduced individual client balance in paragraph 7 for that client.
 (2) When, in respect of a client, there is a negative individual client balance and a positive client equity balance, a firm may offset the credit against the debit and hence have a reduced client equity balance in paragraph 14 for that client.
 19. The effect of paragraph 18 is to allow a firm to offset, on a client by client basis, a negative amount with a positive amount arising out of the calculations in paragraphs 7 and 14, and, by so doing, reduce the amount the firm is required to segregate.
Not in force until 01/12/2014 Not in force until 01/12/2014 Not in force until 01/12/2014 Not in force until 01/12/2014

CASS 7 Annex 6 Sub-pool disclosure document

01/07/2014
FCA
[letterhead of firm, including full name and address of firm, firm reference number]
[addressee - client participating in specified sub-pool]
[date]

Sub-pool disclosure document (under the rules of the Financial Conduct Authority)
 1. The sub-pool to which this sub-pool disclosure document relates is designated in the firm's records as:
 [insert name of sub-pool in firm's records]
 (for the purposes of this document, the "sub-pool")
 2. The net margined omnibus client account relating to the sub-pool is held at [insert name of authorised CCP] and is designated as:
 [insert the account title, the account unique identifier and (if applicable) any abbreviated name of the account as reflected in the authorised CCP's systems]
 (for the purposes of this document, the "omnibus client account").
 3. The purpose of this letter is to:
 (a) provide you with information relating to the sub-pool [operated or to be operated] by [insert name of CASS firm] in relation to the omnibus client account held by the firm at [insert name of authorised CCP];
 (b) obtain your consent to holding your money in the sub-pool; and
 (c) confirm your direction that upon the failure of [insert name of CASS firm], we are to use any client money held by the firm in the sub-pool to facilitate porting.
 4. [name of CASS firm] will hold any client money that we receive from you in relation to the cleared transactions that we maintain for you in the omnibus client account in client bank accounts that we open in relation to the sub-pool, or we will allow the CCP to hold this client money in the omnibus client account.
 5. In the event of the failure of the [insert name of CASS firm], you hereby direct the [insert name of CASS firm] to use any client money held by the [insert name of CASS firm] in the sub-pool to facilitate the porting of the positions recorded in the omnibus client account.
 6. In the event of the failure of [insert name of CASS firm], if porting is not effected, or if porting is effected but any money in the sub-pool is not used to facilitate porting, you and the other beneficiaries of the sub-pool will be entitled to a distribution from any client money held in respect of this sub-pool, in accordance with the client money distribution rules in CASS 7A. Save to the extent that [insert name of CASS firm] holds any other client money for you in the context of any other business or sub-pool, you will not be entitled to a distribution of any other client money held by [insert name of CASS firm].
 7. You hereby consent to the firm receiving and holding your money as client money as part of [sub-pool specified above or specify name of sub-pool]. Until you sign and return this letter the firm will not hold money for you in the sub-pool and you will not be a beneficiary of the sub-pool.
 8. This letter shall be governed by the laws of [England and Wales/Scotland/Northern Ireland /insert appropriate jurisdiction].


If you are in agreement with the foregoing terms, please sign and return the enclosed copy of this letter as soon as possible. You should retain a copy of this letter for your records.

[insert name of CASS firm]
x___________________________
Authorised Signatory
Print Name:
Title:

ACKNOWLEDGED AND AGREED:
[insert name of client]
x___________________________
Authorised Signatory
Print Name:
Title:
Contact Information: [insert signatory's phone number and email address]
Date:

CASS 7A.1 Application and purpose

Application

CASS 7A.1.1
01/07/2014
FCA
Subject to CASS 7A.1.1A R, this chapter (the client money distribution rules) applies to a firm that holds client money which is subject to the client money rules when apooling event occurs.
CASS 7A.1.1A
01/07/2014
FCA
The client money distribution rules do not apply to any client money held by a trustee firm under CASS 7.1.15F R to CASS 7.1.15L G.
CASS 7A.1.1B
01/07/2014
FCA
As a result of CASS 7A.1.1A R, the client money distribution rules relating to primary pooling events and secondary pooling events will not affect any client money held by a firm in its capacity as trustee firm. Instead, the treatment of that client money will be determined by the terms of the relevant instrument of trust or by applicable law. However, the client money distribution rules do apply to a firm for any client money that it holds other than in that capacity which is subject to the client money rules.

Purpose

CASS 7A.1.2
01/01/2009
FCA
The client money distribution rules seek to facilitate the timely return of client money to a client in the event of the failure of a firm or third party at which the firm holds client money.

CASS 7A.2 Primary pooling events

Failure of the authorised firm: primary pooling event

CASS 7A.2.1
01/01/2009
FCA
(1) A firm can hold client money in a general client bank account, a designated client bank account or a designated client fund account.
(2) A firm holds all client money in general client bank accounts for its clients as part of a common pool of money so those particular clients do not have a claim against a specific sum in a specific account; they only have a claim to the client money in general.
(3) A firm holds client money in designated client bank accounts or designated client fund accounts for those clients that requested their client money be part of a specific pool of money, so those particular clients do have a claim against a specific sum in a specific account; they do not have a claim to the client money in general unless a primary pooling event occurs. A primary pooling event triggers a notional pooling of all the client money, in every type of client money account, and the obligation to distribute it.
(4) If the firm becomes insolvent, and there is (for whatever reason) a shortfall in money held for a client compared with that client's entitlements, the available funds will be distributed in accordance with the client money distribution rules.
CASS 7A.2.2
01/10/2013
FCA
A primary pooling event occurs:
(1) on the failure of the firm;
(2) on the vesting of assets in a trustee in accordance with an 'assets requirement' imposed under section 55P(1)(b) or (c) (as the case may be) of the Act;
(3) on the coming into force of a requirement for all client money held by the firm; or
(4) when the firm notifies, or is in breach of its duty to notify, the FCA, in accordance with CASS 7.6.16 R (Notification requirements), that it is unable correctly to identify and allocate in its records all valid claims arising as a result of a secondary pooling event.
CASS 7A.2.3
01/04/2013
FCA
CASS 7A.2.2R (4) does not apply so long as:
(1) the firm is taking steps, in consultation with the FCA, to establish those records; and
(2) there are reasonable grounds to conclude that the records will be capable of rectification within a reasonable period.
CASS 7A.2.3A
01/07/2014
FCA
If a primary pooling event occurs in circumstances where the firm had, before the primary pooling event, reduced its margined transaction requirement by utilising approved collateral under CASS 7 Annex 1 paragraph 15, it must immediately liquidate this approved collateral and place the proceeds in a client bank account.
CASS 7A.2.3B
01/07/2014
FCA
CASS 7A.2.7 R (Client money received after the failure of the firm) do not apply to the proceeds under CASS 7A.2.3A R.
CASS 7A.2.3C
01/07/2014
FCA
The proceeds of the assets realised under CASS 7A.2.3A R:
(1) will form part of the notional pool of client money (see CASS 7A.2.4 R (Pooling and distribution); and
(2) must be distributed in accordance with this chapter.

Pooling and distribution

CASS 7A.2.4
01/07/2014
FCA
If a primary pooling event occurs, then:
(1) in respect of either the general pool or a sub-pool, client money held in a client bank account or a client transaction account of the firm relating to that pool is treated as a single notional pool of client money for the beneficiaries of that pool, except for client money held in a client transaction account at an authorised central counterparty or a clearing member which is, in either case, held as part of a regulated clearing arrangement;
(2) the firm must :
(a) distribute client money comprising a notional pool in accordance with CASS 7.7.2 R, so that each client who is a beneficiary of that pool receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7A.2.5 R; or
(b) (where applicable) transfer client money comprising a sub-pool to effect or facilitate porting of positions held for the clients who are beneficiaries of that sub-pool; and
(3) if, in connection with a regulated clearing arrangement, client money is remitted directly to the firm either from an authorised central counterparty or from a clearing member, then:
(a) any such remittance in respect of a client transaction account that is an individual client account must be distributed to the relevant client subject to CASS 7.7.2R (4);
(b) subject to (3)(c) and (d), any such remittance in respect of a client transaction account that is an omnibus client account must form part of the notional pool under CASS 7A.2.4R (1) and be subject to distribution in accordance with CASS 7A.2.4R (2);
(c) any such remittance in respect of a client transaction account that is an omnibus client account must be distributed to the relevant clients for whom that omnibus client account is held if:
(i) no client money in excess of the amount recorded in that omnibus client account is held by the firm as margin in relation to the positions recorded in that omnibus client account; and
(ii) the amount of such remittance attributable to each client of the omnibus client account is readily apparent from information provided to the firm by the authorised central counterparty or, in the case of indirect clients, the clearing member;

in which case the amount of such remittance must be distributed to each such client in accordance with the information provided by the authorised central counterparty or clearing member subject to CASS 7.7.2R (4); and
(d) any such remittance in respect of a client transaction account that is a net margined omnibus client account in respect of which the firm maintains a sub-pool must form part of such sub-pool to be distributed in accordance with CASS 7A.2.4R (2)(a).
CASS 7A.2.4A
01/07/2014
FCA
(1) Under EMIR, where a firm that is a clearing member of an authorised central counterparty defaults, the authorised central counterparty may:
(a) port client positions where possible; and
(b) after the completion of the default management process:
(i) return any balance due directly to those clients for whom the positions are held, if they are known to the authorised central counterparty; or
(ii) remit any balance to the firm for the account of its clients if the clients are not known to the authorised central counterparty.
(1A) Under the EMIR L2 Regulation, where a firm acting in connection with a regulated clearing arrangement for a client (who is also an indirect client) defaults, the clearing member with whom the firm has placed client money of the indirect client, may, in accordance with the EMIR L2 Regulation:
(a) transfer the positions and assets either to another clearing member of the relevant authorised central counterparty or to another firm willing to act for the indirect client; or
(b) liquidate the assets and positions of the indirect clients and remit all monies due to the indirect clients.
(1B) For the avoidance of doubt, 'relevant clients' in the case of CASS 7A.2.4R (3)(a) and CASS 7A.2.4R (3)(c) includes a client who is also an indirect client.
(2) Where any balance remitted from an authorised central counterparty or, in the case of indirect clients, a clearing member, to a firm is client money, CASS 7A.2.4R (3) provides for the distribution of remittances from either an individual client account or an omnibus client account.
(3) Remittances received by the firm falling within CASS 7A.2.4R (3)(a) and CASS 7A.2.4R (3)(c) should not be pooled with client money held in any client bank account operated by the firm at the time of the primary pooling event. Those remittances should be segregated and promptly distributed to each client on whose behalf the remittance was received.
(4) For the avoidance of doubt, in respect of a regulated clearing arrangement, any client money remitted by the authorised central counterparty or, in the case of indirect clients, the clearing member, to the firm pursuant to CASS 7A.2.4R (3) should not be treated as client money received after the failure of the firm under CASS 7A.2.7 R.
(5) The firm's obligation to its client in respect of client money held in a sub-pool is discharged to the extent that the firm transfers that client money to facilitate porting in accordance with CASS 7.2.15R (8).
CASS 7A.2.5
01/07/2014
FCA
(-1) Each client's client equity balance must be reduced by:
(a) any amount paid by:
(i) an authorised central counterparty to a clearing member other than the firm in connection with a porting arrangement in accordance with CASS 7.2.15R (6) in respect of that client;
(ii) a clearing member to another clearing member or firm (other than the firm) in connection with a transfer in accordance CASS 7.2.15R (8);
(b) any amount paid by:
(i) an authorised central counterparty directly to that client, in accordance withCASS 7.2.15R (7); and
(ii) a clearing member directly to an indirect client in accordanceCASS 7.2.15R (9); and
(c) any amount that must be distributed to that client by the firm in accordance with CASS 7A.2.4R (3)(a) or (c).
(1) When, in respect of a client who is a beneficiary of a pool, there is a positive individual client balance and a negative client equity balancein relation to that pool, the credit for that pool must be offset against the debit reducing theindividual client balance for that client.
(2) When, in respect of a client who is a beneficiary of a pool, there is a negative individual client balance and a positive client equity balance in relation to that pool, the credit for that pool must be offset against the debit for that pool reducing the client equity balance for that client.
CASS 7A.2.6
01/01/2013
[deleted]

Client money received after the failure of the firm

CASS 7A.2.7
01/07/2014
FCA
Client money received by the firm after a primary pooling event in respect of a pool must not be pooled with client money held in any client money account operated by the firm either in respect of that pool or any other pool at the time of the primary pooling event. It must be placed in a client bank account that has been opened after that event and must be handled in accordance with the client money rules, and returned to the relevant client without delay, except to the extent that:
(1) it is client money relating to a transaction that has not settled at the time of the primary pooling event; or
(2) it is client money relating to a client, for whom the client money entitlement, calculated in accordance with CASS 7A.2.5 R, shows that money is due from the client to the firm at the time of the primary pooling event.
CASS 7A.2.8
01/01/2009
FCA
Client money received after the primary pooling event relating to an unsettled transaction should be used to settle that transaction. Examples of such transactions include:
(1) an equity transaction with a trade date before the date of the primary pooling event and a settlement date after the date of the primary pooling event; or
(2) a contingent liability investment that is 'open' at the time of the primary pooling event and is due to settle after the primary pooling event.
CASS 7A.2.9
01/01/2009
FCA
If a firm receives a mixed remittance after a primary pooling event, it must:
(1) pay the full sum into the separate client bank account opened in accordance with CASS 7A.2.7 R; and
(2) pay the money that is not client money out of that client bank account into a firm's own bank account within one business day of the day on which the firm would normally expect the remittance to be cleared.
CASS 7A.2.10
01/01/2009
FCA
Whenever possible the firm should seek to split a mixed remittance before the relevant accounts are credited.
CASS 7A.2.11
01/01/2009
FCA
If both a primary pooling event and a secondary pooling event occur, the provisions of this section relating to a primary pooling event apply.

CASS 7A.3 Secondary pooling events

Failure of a bank, intermediate broker, settlement agent or OTC counterparty: secondary pooling events

CASS 7A.3.1
01/01/2009
FCA
A secondary pooling event occurs on the failure of a third party to which client money held by the firm has been transferred underCASS 7.4.1R (1) to CASS 7.4.1R (3) (Depositing client money) or CASS 7.5.2 R (Transfer of client money to a third party).
CASS 7A.3.2
01/01/2009
FCA
CASS 7A.3.6 R to CASS 7A.3.18 R do not apply if, on the failure of the third party, the firm repays to its clients or pays into a client bank account, at an unaffected bank, an amount equal to the amount of client money which would have been held if a shortfall had not occurred at that third party.
CASS 7A.3.3
01/01/2009
FCA
When client money is transferred to a third party, a firm continues to owe fiduciary duties to the client. Whether a firm is liable for a shortfall in client money caused by a third party failure will depend on whether it has complied with its duty of care as agent or trustee.

Failure of a bank

CASS 7A.3.4
01/07/2014
FCA
When a bank fails and the firm decides not to make good the shortfall in the amount of client money held at that bank, a secondary pooling event will occur in accordance with CASS 7A.3.6 R. The firm would be expected to reflect the shortfall that arises at the failed bank in the general pool (where the firm maintains only a general pool) and, where relevant, in a particular sub-pool (where the firm maintains both a general pool and one or more sub-pools) in its records of the entitlement of clients and of money held with third parties under CASS 7.6 (Records, accounts and reconciliations).
CASS 7A.3.5
01/01/2009
FCA
The client money distribution rules seek to ensure that clients who have previously specified that they are not willing to accept the risk of the bank that has failed, and who therefore requested that their client money be placed in a designated client bank account at a different bank, should not suffer the loss of the bank that has failed.

Failure of a bank: pooling

CASS 7A.3.6
01/07/2014
FCA
If a secondary pooling event occurs as a result of the failure of a bank where one or more general client bank accounts are held for the general pool or particular sub-pool, then:
(1) in relation to every general client bank account of the firm maintained in respect of that pool, the provisions of CASS 7A.3.8 R, CASS 7A.3.13 R and CASS 7A.3.14 R will apply;
(2) in relation to every designated client bank account held by the firm with the failed bank for the relevant pool, the provisions of CASS 7A.3.10 R, CASS 7A.3.13 R and CASS 7A.3.14 R will apply;
(3) in relation to each designated client fund account held by the firm with the failed bank for the relevant pool, the provisions of CASS 7A.3.11 R, CASS 7A.3.13 R and CASS 7A.3.14 R will apply;
(4) any money held at a bank, other than the bank that has failed, in designated client bank accounts for the relevant pool, is not pooled with any other client money held for that pool or any other pool; and
(5) any money held in a designated client fund account in respect of that pool, no part of which is held by the bank that has failed, is not pooled with any other client money held for that pool or any other pool.
CASS 7A.3.7
01/07/2014
FCA
If a secondary pooling event occurs as a result of the failure of a bank where one or more designated client bank accounts or designated client fund accounts are held in respect of a pool, then:
(1) in relation to every designated client bank account held by the firm with the failed bank in respect of that pool, the provisions of CASS 7A.3.10 R, CASS 7A.3.13 R and CASS 7A.3.14 R will apply; and
(2) in relation to each designated client fund account held by the firm with the failed bankin respect of that pool, the provisions of CASS 7A.3.11 R, CASS 7A.3.13 R and CASS 7A.3.14 R will apply.
CASS 7A.3.8
01/07/2014
FCA
Money held in each general client bank account and client transaction account of the firm for the general pool or a sub-poolmust be treated as pooled and:
(1) any shortfall in client money held, or which should have been held, in general client bank accounts and client transaction accounts for the relevant pool, that has arisen as a result of the failure of the bank, must be borne by all the clients of that pool whose client money is held in such general client bank account or client transaction account of the firm, rateably in accordance with their entitlements;
(2) a new client money entitlement must be calculated for each client of the relevant pool by the firm, to reflect the requirements in (1), and the firm's records must be amended to reflect the reduced client money entitlement;
(3) the firm must make and retain a record of each client's share of the client money shortfall at the failed bank until the client is repaid; and
(4) the firm must use the new client money entitlements, calculated in accordance with (2), for the purposes of reconciliations pursuant to CASS 7.6.2 R (Records and accounts) for that pool, and where relevant SYSC 4.1.1 R (General organisational requirements) and SYSC 6.1.1 R (Compliance).
CASS 7A.3.9
06/04/2010
FCA
The term "which should have been held" is a reference to the failed bank's failure to hold the client money at the time of the pooling event.
CASS 7A.3.10
01/07/2014
FCA
For each client with a designated client bank account maintained by the firm for the general pool or a particular sub-pool and held at the failed bank:
(1) any shortfall in client money held, or which should have been held, in designated client bank accounts that has arisen as a result of the failure, must be borne by all the clients of the relevant pool whose client money is held in a designated client bank account of the firm at the failed bank, rateably in accordance with their client money entitlements;
(2) a new client money entitlement must be calculated for each of the relevant clients of the relevant pool by the firm, and the firm's records must be amended to reflect the reduced client money entitlement;
(3) the firm must make and retain a record of each client's share of the client money shortfall at the failed bank until the client is repaid; and
(4) the firm must use the new client money entitlements, calculated in accordance with (2), for the purposes of reconciliations pursuant to CASS 7.6.2 R (Records and accounts) in respect of the relevant pool, and where relevant SYSC 4.1.1 R (General organisational requirements) and SYSC 6.1.1 R (Compliance).
CASS 7A.3.11
01/07/2014
FCA
Money held by the firm in each designated client fund account for the general pool or a particular sub-pool with the failed bank must be treated as pooled with any other designated client fund accounts for the general pool or a particular sub-pool as the case may be which contain part of the same designated fund and:
(1) any shortfall in client money held, or which should have been held, in designated client fund accounts that has arisen as a result of the failure, must be borne by each of the clients of the relevant pool whose client money is held in that designated fund, rateably in accordance with their entitlements;
(2) a new client money entitlement must be calculated for each client of the relevant pool by the firm, in accordance with (1), and the firm's records must be amended to reflect the reduced client money entitlement;
(3) the firm must make and retain a record of each client's share of the client money shortfall at the failed bank until the client is repaid; and
(4) the firm must use the new client money entitlements, calculated in accordance with (2), for the purposes of reconciliations pursuant to CASS 7.6.2 R (Records and accounts) for the relevant pool, and where relevant SYSC 4.1.1 R (General organisational requirements) and SYSC 6.1.1 R (Compliance).
CASS 7A.3.12
01/01/2009
FCA
A client whose money was held, or which should have been held, in a designated client bank account with a bank that has failed is not entitled to claim in respect of that money against any other client bank account or client transaction account of the firm.

Client money received after the failure of a bank

CASS 7A.3.13
01/07/2014
FCA
Client money received by the firm after the failure of a bank, that would otherwise have been paid into a client bank account at that bank , for either the general pool or a particular sub-pool:
(1) must not be transferred to the failed bank unless specifically instructed by the client in order to settle an obligation of that client to the failed bank; and
(2) must be, subject to (1), placed in a separate client bank account relating to the general pool or the particular sub-pool as the case may be that has been opened after the secondary pooling event and either:
(a) on the written instruction of the client, transferred to a bank other than the one that has failed; or
(b) returned to the client as soon as possible.
CASS 7A.3.14
01/01/2009
FCA
If a firm receives a mixed remittance after the secondary pooling event which consists of client money that would have been paid into a general client bank account, a designated client bank account or a designated client fund account maintained at the bank that has failed, it must:
(1) pay the full sum into a client bank account other than one operated at the bank that has failed; and
(2) pay the money that is not client money out of that client bank account within one business day of the day on which the firm would normally expect the remittance to be cleared.
CASS 7A.3.15
01/01/2009
FCA
Whenever possible the firm should seek to split a mixed remittance before the relevant accounts are credited.

Failure of an intermediate broker, settlement agent or OTC counterparty: Pooling

CASS 7A.3.16
01/07/2014
FCA
If a secondary pooling event occurs as a result of the failure of an intermediate broker, settlement agent or OTC counterparty, then in relation to every general client bank account and client transaction account of the firmrelating to the general pool or a particular sub-pool as the case may be, the provisions of CASS 7A.3.17 R and CASS 7A.3.18 R will apply.
CASS 7A.3.17
01/07/2014
FCA
Money held in each general client bank account and client transaction account of the firm relating to the general pool or a particular sub-pool as the case may be,must be treated as pooled and:
(1) any shortfall in client money held, or which should have been held, in general client bank accounts and client transaction accounts, that has arisen as a result of the failure, must be borne by all the clients whose client money is held in either a general client bank account or a client transaction account of the firm relating to the general pool or the particular sub-pool as the case may be, rateably in accordance with their entitlements;
(2) a new client money entitlement must be calculated for each client by the firm, to reflect the requirements of (1), and the firm's records must be amended to reflect the reduced client money entitlement relating to the general pool or the particular sub-pool as the case may be;
(3) the firm must make and retain a record of each client's share of the client money shortfall at the failed intermediate broker, settlement agent or OTC counterparty until the client is repaid; and
(4) the firm must use the new client money entitlements, calculated in accordance with (2), for the purposes of reconciliations pursuant to CASS 7.6.2 R (Records and accounts), and where relevant SYSC 4.1.1 R (General organisational requirements) and SYSC 6.1.1 R (Compliance).

Client money received after the failure of an intermediate broker, settlement agent or OTC counterparty

CASS 7A.3.18
01/07/2014
FCA
Client money received by the firm after the failure of an intermediate broker, settlement agent or OTC counterparty, that would otherwise have been paid into a client transaction account at that intermediate broker, settlement agent or OTC counterparty relating to the general pool or a particular sub-pool as the case may be:
(1) must not be transferred to the failed third party unless specifically instructed by the client in order to settle an obligation of that client to the failed intermediate broker, settlement agent or OTC counterparty; and
(2) must be, subject to (1), placed in a separate client bank account relating to the general pool or the particular sub-pool as the case may be,that has been opened after the secondary pooling event and either:
(a) on the written instruction of the client, transferred to a third party other than the one that has failed; or
(b) returned to the client as soon as possible.

Notification to the FCA: failure of a bank, intermediate broker, settlement agent or OTC counterparty

CASS 7A.3.19
01/04/2013
FCA
On the failure of a third party with which money is held, a firm must notify the FCA:
(1) as soon as it becomes aware of the failure of any bank, intermediate broker, settlement agent, OTC counterparty or other entity with which it has placed, or to which it has passed, client money; and
(2) as soon as reasonably practical, whether it intends to make good any shortfall that has arisen or may arise and of the amounts involved.

CASS 8.1 Application

CASS 8.1.1
01/04/2014
FCA
This chapter (the mandate rules) applies to a firm when it has a mandate in the course of, or in connection with, the firm's:
(1) designated investment business (including MiFID business); or
(2) insurance mediation activity, except where it relates to a reinsurance contract;
(3) debt management activity.
CASS 8.1.2
01/01/2013
[deleted]
CASS 8.1.2A
01/04/2014
FCA
The mandate rules do not apply to a firm:
(1) in relation to client money that the firm is holding in accordance with CASS 5 or CASS 7 (including client money that the firm has allowed another person to hold or control in accordance with CASS 7.5.2 R) or CASS 11; or
(2) in relation to safe custody assets that the firm is holding, or in respect of which the firm is carrying on safeguarding and administration of assets (without arranging), acting as trustee or depositary of an AIF or acting as trustee or depositary of a UCITS in accordance with CASS 6; or
(3) in relation to a client's assets that the firm is holding or has received under an arrangement to which CASS 3 applies; or
(4) when it acts as the operator of a regulated collective investment scheme in relation to property held for or within the scheme.
CASS 8.1.2B
01/01/2013
FCA
(1) CASS 8.1.2A R is not an absolute exemption, but it excludes the application of the mandate rules in relation to money or assets that a firm has received, is holding, or is responsible for (as appropriate and in the circumstances described in CASS 8.1.2A R).
(2) This means that, for example in respect of CASS 8.1.2A R (1), a firm holding client money in accordance with CASS 5 or CASS 7 does not also need to comply with the mandate rules in relation to the client money which it actually holds, but the mandate rules would apply if the firm has a mandate under which it can receive a client's money from another person in the course of, or in connection with, the activities set out at CASS 8.1.1 R (1) and CASS 8.1.1 R (2).
(3) Similarly, in respect of CASS 8.1.2A R (4), the mandate rules apply to a firm that is the operator of a regulated collective investment scheme if, for example, it has a mandate under which it can receive a client's money from another person for the purposes of investing it in the scheme.
CASS 8.1.3
06/04/2010
FCA
Firms are reminded that the mandate rules do not apply to an incoming EEA firm, other than an insurer, with respect to its passported activities. The application of the mandate rules is also dependent on the location from which the activity is undertaken (see CASS 1.3).

Purpose

CASS 8.1.4
01/01/2013
FCA
The mandate rules require firms to establish and maintain records and internal controls to prevent the misuse ofa mandate.
CASS 8.1.4A
01/01/2013
FCA
The mandate rules only apply to a firm that has a mandate, and do not affect the duties of any other person to whom the firm is able to give the types of instructions referred to in CASS 8.2.1R (4). For example, if a person (A) has accepted a deposit from a client, and a firm (B) has a mandate in respect of that client's deposit held by A, the mandate rules only apply to B, and do not affect the duties of A in relation to the deposit.
CASS 8.1.5
01/01/2013
[deleted]

CASS 8.2 Definition of mandate

CASS 8.2.1
22/07/2013
FCA
A mandate is any means that give a firm the ability to control a client's assets or liabilities, which meet the conditions in (1) to (5):
(1) they are obtained by the firm from the client, and with the client's consent;
(2) they are in written form at the time they are obtained from the client;
(3) they are retained by the firm;
(4) they put the firm in a position where it is able to give any or all of the types of instructions described in (a) to (d):
(a) instructions to another person in relation to the client's money that is credited to an account maintained by that other person for the client;
(b) instructions to another person in relation to any money to which the client has an entitlement, where that other person is responsible to the client for that entitlement (including where that other person is holding client money for the client in accordance with CASS 5 or CASS 7);
(c) instructions to another person in relation to an asset of the client, where that other person is responsible to the client for holding that asset (including where that other person is safeguarding and administering investments, acting as trustee or depositary of an AIF or acting as trustee or depositary of a UCITS);
(d) instructions to another person such that the client incurs a debt or other liability to that other person or any other person (other than the firm); and
(5) their circumstances are such that the client's further involvement would not be necessary for the firm's instructions described in 4(a) to 4(d) to be given effect.

Written form

CASS 8.2.2
01/01/2013
FCA
A mandate can take any written form and need not state that it is a mandate. For example it could take the form of a standalone document containing certain information or conferring a certain authority on the firm, a specific provision within a document or agreement that also relates to other matters, or a combination of provisions within a number of documents which together meet the conditions in CASS 8.2.1 R.

Retention by the firm

CASS 8.2.3
01/01/2013
FCA
(1) If a firm receives information that puts it in the position described in CASS 8.2.1 R (4) in order to effect transactions immediately on receiving that information, then such information could only amount to a mandate if the firm retainsit (for example by not destroying the relevant document):
(a) after it uses it to effect those immediate transactions; or
(b) because those transactions are not, for whatever reason, effected immediately.
(2) If a firm receives information that puts it in the position described in CASS 8.2.1 R (4) and the firm retains that information (for example in accordance with its record-keeping procedures or in order to effect transactions in the future or over a period of time) then such information could amount to a mandate.

Ability to give instructions to another person

CASS 8.2.4
01/01/2013
FCA
The instructions referred to at CASS 8.2.1 R (4) are all instructions given by a firm to another person who also has a relationship with the firm's client. For example, the other person may be the client's bank, intermediary, custodian or credit card provider. This means, for example, that any means by which a firm can control a client's money or assets for which it is itself responsible to the client (rather than any other person) would not amount to a mandate. This includes where the firm is holding a client's money or assets other than in accordance with CASS 5, CASS 6 or CASS 7 (for example, because of an exemption in those rules).
CASS 8.2.5
01/01/2013
FCA
A mandate in relation to the type of instructions referred to in CASS 8.2.1R (4)(a) could include a direct debit instruction over a client's bank account in favour of the firm.
CASS 8.2.6
01/01/2013
FCA
A mandate in relation to the type of instructions referred to in CASS 8.2.1 R (4)(d) could include written information that sets out the client's credit card details.

Conditions on use of mandate and client's further involvement

CASS 8.2.7
01/01/2013
FCA
(1) If a firm obtains the means by which it can give the types of instructions referred to in CASS 8.2.1 R (4), but its use of those means is subject to any limits or conditions, then this does not necessarily prevent those means from being a mandate. For example, a client might require that a firm uses a mandate only in connection with transactions up to a certain value.
(2) However, if a firm obtains the means by which it can give the types of instructions referred to in CASS 8.2.1 R (4), but the firm cannot, in practice, use those means without the client's further involvement, then the condition in CASS 8.2.1 R (5) would not be met. For example, a firm might have the means by which it can give instructions of the type referred to in CASS 8.2.1 R (4)(a) in relation to an account maintained by another person for a client, but that other person might require the client's signature or other authorisation before it gives effect to those instructions.

CASS 8.3 Records and internal controls

CASS 8.3.1
01/01/2013
FCA
A firm that has mandates must establish and maintain adequate records and internal controls in respect of its use of the mandates.
CASS 8.3.2
01/01/2013
FCA
The records and internal controls required by CASS 8.3.1 R must include:
(1) an up-to-date list of each mandate that the firm has obtained, including a record of any conditions placed by the client or the firm's management on the use of the mandate;
(2) a record of each transaction entered into under each mandate that the firm has;
(3) internal controls to ensure that each transaction entered into under each mandate that the firm has is in accordance with any conditions placed by the client or the firm's management on the use of the mandate;
(4) the details of the procedures and internal controls around the giving of instructions under the mandates that the firm has (such instructions being those referred to in CASS 8.2.1 R (4)); and
(5) where the firm holds a passbook or similar documents belonging to the client, internal controls for the safeguarding (including against loss, unauthorised destruction, theft, fraud or misuse) of any passbook or similar document belonging to the client held by the firm.
CASS 8.3.2F
01/06/2014
When keeping its list of mandates under up to date:
(1) a firm should create a new entry in the list each time the firm obtains a new mandate;
(2) if, for an existing entry on its list, a firm obtains the same information meeting the conditions in again (eg in a written confirmation following a paperless direct debit), the additional mandate is not a new mandate and the firm should not create another entry on the list; but
(3) the firm should, for every entry on its list, identify each of the locations in which it has retained the information that meets the conditions in (eg a client's debit card details retained in a telephone recording and also the firm's written log of the call, or two separate documents containing the same information).
CASS 8.3.3
01/01/2013
FCA
A firm should distinguish between conditions placed by a client on the firm's use of a mandate, and criteria to which transactions effected by a firm with or for a client may be subject.
(1) The requirements in CASS 8.3.2 R (1) and CASS 8.3.2 R (3) apply only in respect of conditions placed around the firm's use of a mandate itself or around the instructions described in CASS 8.2.1 R (4). Examples of these include conditions under which a mandate may only be used by the firm in connection with transactions up to a certain value, or under which instructions under a mandate may only be given by certain personnel within the firm.
(2) The requirements in CASS 8.3.2 R (1) and CASS 8.3.2 R (3) do not apply in respect of criteria which relate to the nature and circumstances of transactions effected by a firm with or for a client. Examples of those criteria include investment restrictions or exposure limits for a managed portfolio, and required or preferred execution prices or execution venues.

CASS 9.1 Application

CASS 9.1.1
01/03/2011
FCA
This chapter applies to a firm:
(1) to which CASS 6 (Custody rules) applies; and
(2) which is a prime brokerage firm.

CASS 9.2 Prime broker's daily report to clients

CASS 9.2.1
01/03/2011
FCA
(1) A firm must make available to each of its clients to whom it provides prime brokerage services a statement in a durable medium:
(a) showing the value at the close of each business day of the items in (3); and
(b) detailing any other matters which that firm considers are necessary to ensure that a client has up-to-date and accurate information about the amount of client money and the value of safe custody assets held by that firm for it.
(2) The statement must be made available to those clients not later than the close of the next business day to which it relates.
(3) The statement must include:
(a) the total value of safe custody assets and the total amount of client money held by that prime brokerage firm for a client;
(b) the cash value of each of the following:
(i) Cash loans made to that client and accrued interest;
(ii) securities to be redelivered by that client under open short positions entered into on behalf of that client;
(iii) current settlement amount to be paid by that client under any futures contracts;
(iv) short sale cash proceeds held by the firm in respect of short positions entered into on behalf of that client;
(v) cash margin held by the firm in respect of open futures contracts entered into on behalf of that client;
(vi) mark-to-market close-out exposure of any OTC transaction entered into on behalf of that client secured by safe custody assets or client money;
(vii) total secured obligations of that client against the prime brokerage firm; and
(viii) all other safe custody assets held for that client.
(c) total collateral held by the firm in respect of secured transactions entered into under a prime brokerage agreement, including where the firm has exercised a right of use in respect of that client's safe custody assets;
(d) the location of all of a client's safe custody assets, including assets held with a sub-custodian; and
(e) a list of all the institutions at which the firm holds or may hold client money, including money held in client bank accounts and client transaction accounts.
CASS 9.2.2
22/07/2013
FCA
Where a firm has entered into an agreement with a client under article 91 (Reporting obligations for prime brokers) of the AIFMD level 2 regulation, and to the extent that the firm makes available to the client the same statements as specified by that article that it is required to provide to the relevant depositary, the FCA will treat the obligations under CASS 9.2.1 R as satisfied by the firm.

CASS 9.3 Prime brokerage agreement disclosure annex

CASS 9.3.1
01/03/2011
FCA
(1) A firm must ensure that every prime brokerage agreement that includes its right to use safe custody assets for its own account includes a disclosure annex.
(2) A firm must ensure that the disclosure annex sets out a summary of the key provisions within the prime brokerage agreement permitting the use of safe custody assets, including:
(a) the contractual limit, if any, on the safe custody assets which a prime brokerage firm is permitted to use;
(b) all related contractual definitions upon which that limit is based;
(c) a list of numbered references to the provisions within that prime brokerage agreement which permit the firm to use the safe custody assets; and
(d) a statement of the key risks to that client's safe custody assets if they are used by the firm, including but not limited to the risks to the safe custody assets on the failure of the firm.
(3) A firm must ensure that it sends to the client in question an updated disclosure annex if the terms of the prime brokerage agreement are amended after completion of that agreement such that the original disclosure annex no longer accurately records the key provisions of the amended agreement.
CASS 9.3.2
22/07/2013
FCA
(1) Principle 10 (Clients' assets) requires a firm to arrange adequate protection for client's assets when it is responsible for them. As part of these protections, the custody rules require a firm to take appropriate steps to protect safe custody assets for which it is responsible.
(2) Subject to paragraph (3), a prime brokerage firm should not enter into "right to use arrangements" for a client's safe custody assets unless:
(a) in the case of a CASS small firm or a firm to which CASS 1A.3.1C R applies, the person in that firm to whom the responsibilities set out in CASS 1A.3.1 R or in CASS 1A.3.1C R (2) respectively have been allocated; or
(b) in the case of any other firm, the person who carries out the CASS operational oversight function; and
(c) those of that firm's managers who are responsible for those safe custody assets;

are each satisfied that the firm has adequate systems and controls to discharge its obligations under Principle 10 which include (where applicable):
(i) the daily reporting obligation in CASS 9.2.1 R; and
(ii) the record-keeping obligations in CASS 6.3.6 R (3)(b)(i).
(3) Paragraph (2) does not apply where the prime brokerage firm is also acting as trustee or depositary of an AIF which is an unauthorised AIF and exercises a right of reuse for a safe custody asset of that unauthorised AIF under FUND 3.11.24 R (Reuse of assets).
Not in force until 01/12/2014 Not in force until 01/06/2015

CASS 10.1 Application, purpose and general provisions

Application

CASS 10.1.1
22/07/2013
FCA
(1) Subject to (2) this chapter applies to a firm when it:
(a) holds financial instruments, is safeguarding and administering investments, is acting as trustee or depositary of an AIF or is acting as trustee or depositary of a UCITS, in accordance with CASS 6; and/or
(b) holds client money in accordance with CASS 7.
(2) This chapter does not apply to a firm to which CASS 6 applies merely because it is a firm which arranges safeguarding and administration of assets.

Purpose

CASS 10.1.2
01/10/2012
FCA
The purpose of the CASS resolution pack is to ensure that a firm maintains and is able to retrieve information that would, in the event of its insolvency, assist an insolvency practitioner in achieving a timely return of client money and safe custody assets held by the firm to that firm's clients.

General provisions

CASS 10.1.3
01/10/2012
FCA
A firm falling within CASS 10.1.1 R must maintain and be able to retrieve, in the manner described in this chapter, a CASS resolution pack.
CASS 10.1.4
01/10/2012
FCA
A firm is required to maintain a CASS resolution pack at all times when CASS 10.1.1 R applies to it.
CASS 10.1.5
01/10/2012
FCA
(1) The rules in this chapter specify the types of documents and records that must be maintained in a firm's CASS resolution pack and the retrieval period for the pack. The firm should maintain the component documents of the CASS resolution pack in order for them to be retrieved in accordance with CASS 10.1.7 R, and should not use the retrieval period to start producing these documents.
(2) The contents of the documents that constitute the CASS resolution pack will change from time to time (for example, because daily reconciliations must be included in the pack).
(3) A firm is only required to retrieve the CASS resolution pack in the circumstances prescribed in CASS 10.1.7 R.
CASS 10.1.6
01/10/2012
FCA
For the purpose of this chapter, a firm will be treated as satisfying a rule in this chapter requiring it to include a document in its CASS resolution pack if a member of that firm's group includes that document in its own CASS resolution pack, provided that:
(1) that group member is subject to the same rule; and
(2) the firm is still able to comply with CASS 10.1.7 R.
CASS 10.1.7
01/04/2013
FCA
In relation to each document in a firm's CASS resolution pack a firm must:
(1) put in place adequate arrangements to ensure that an administrator, receiver, trustee, liquidator or analogous officer appointed in respect of it or any material part of its property is able to retrieve each document as soon as practicable and in any event within 48 hours of that officer's appointment; and
(2) ensure that it is able to retrieve each document as soon as practicable, and in any event within 48 hours, where it has taken a decision to do so or as a result of an FCA request.
CASS 10.1.8
01/10/2012
FCA
Where documents are held by members of a firm's group in accordance with CASS 10.1.6 R, the firm must have adequate arrangements in place with its group members which allow for delivery of the documents within the timeframe referred to in CASS 10.1.7 R.
CASS 10.1.9
01/10/2012
FCA
(1) For the purpose of CASS 10.1.7 R, the following documents and records should be retrievable immediately:
(a) the document identifying the institutions referred to in CASS 10.2.1R (2);
(b) the document identifying individuals pursuant to CASS 10.2.1R (4);
(c) any written notification or trust acknowledgement letters referred to in CASS 10.2.1R (5);
(d) the most recentinternal reconciliations relating to safe custody assets referred to in CASS 10.3.1R (3);
(e) the most recentexternal reconciliations relating to safe custody assets referred to in CASS 10.3.1R (5);
(f) the most recentinternal reconciliations relating to client money referred to in CASS 10.3.1R (7) and; and
(g) the most recentexternal reconciliations relating to client money referred to in CASS 10.3.1R (9).
(2) Where a firm is reliant on the continued operation of certain systems for the provision of component documents in its CASS resolution pack, it should have arrangements in place to ensure that these systems will remain operational and accessible to it after its insolvency.
(3) Contravention of (1) or (2) may be relied upon as tending to establish contravention of CASS 10.1.7 R.
CASS 10.1.10
01/10/2012
FCA
Where a firm anticipates that it might be the subject of an insolvency order, it is likely to have sought advice from an external adviser. The firm should make the CASS resolution pack available promptly, on request, to such an adviser.
CASS 10.1.11
01/10/2012
FCA
(1) A firm must ensure that it reviews the content of its CASS resolution pack on an ongoing basis to ensure that it remains accurate
(2) In relation to any change of circumstances that has the effect of rendering inaccurate, in any material respect, the content of a document specified in CASS 10.2.1 R, a firm must ensure that any inaccuracy is corrected promptly and in any event no more than five business days after the change of circumstances arose.
CASS 10.1.12
01/10/2012
FCA
For the purpose of CASS 10.1.11R (2), an example of a change that would render a document inaccurate in a material respect is a change of institution identified pursuant to CASS 10.2.1R (2).
CASS 10.1.13
01/10/2012
FCA
A firm may hold in electronic form any document in its CASS resolution pack provided that it continues to be able to comply with CASS 10.1.7 R and CASS 10.1.11 R in respect of that document.
CASS 10.1.14
01/01/2013
FCA
The individual to whom responsibility for CASS operational oversight has been allocated under CASS 1A.3.1 R, CASS 1A.3.1A R or, as the case may be, CASS 1A.3.1C R (2), must report at least annually to the firm's governing body in respect of compliance with the rules in this chapter.
CASS 10.1.15
01/01/2013
FCA
Individuals allocated functions relating to CASS operational oversight pursuant to CASS 1A.3.1 R, CASS 1A.3.1A R or, as the case may be, CASS 1A.3.1C R (2), are reminded that their responsibilities include compliance with the provisions in this chapter.
CASS 10.1.16
01/04/2013
FCA
A firm must notify the FCA in writing immediately if it has not complied with, or is unable to comply with, CASS 10.1.3 R.

CASS 10.2 Core content requirements

CASS 10.2.1
01/10/2012
FCA
A firm must include within its CASS resolution pack:
(1) a master document containing information sufficient to retrieve each document in the firm's CASS resolution pack;
(2) a document which identifies the institutions the firm has appointed (including through an appointed representative, tied agent, field representative or other agent):
(a) in the case of client money, for the placement of money in accordance with CASS 7.4.1 R or to hold or control client money in accordance with CASS 7.5.2 R; and
(b) in the case of safe custody assets, for the deposit of those assets in accordance with CASS 6.3.1 R;
(3) a document which identifies each appointed representative, tied agent, field representative or other agent of the firm which receives client money or safe custody assets in its capacity as the firm's agent;
(4) a document which identifies:
(a) each senior manager and director and any other individual and the nature of their responsibility within the firm who is critical or important to the performance of operational functions related to any of the obligations imposed on the firm by CASS 6 or CASS 7; and
(b) the individual to whom responsibility for CASS operational oversight has been allocated under CASS 1A.3.1 R or, as the case may be, to whom the CASS operational oversight function has been allocated under CASS 1A.3.1A R;
(5) for each institution identified in CASS 10.2.1R (2), a copy of each executed agreement, including any side letters or other agreements used to clarify or modify the terms of the executed agreement, between that institution and the firm that relates to the holding of client money or safe custody assets including any written notification or trust acknowledgement letterssent or received pursuant to CASS 7.8;
(6) a document which:
(a) identifies each member of the firm's group involved in operational functions related to any obligations imposed on the firm under CASS 6 or CASS 7, including in the case of a member that is a nominee company, identification as such; and
(b) identifies each third party which the firm uses for the performance of operational functions related to any of the obligations imposed on the firm by CASS 6 or CASS 7; and
(c) for each group member identified in (a), the type of entity (such as branch, subsidiary and or nominee company) the group member is, its jurisdiction of incorporation if applicable, and a description of its related operational functions;
(7) a copy of each executed agreement, including any side letters or other agreements used to clarify or modify the terms of the executed agreement, between the firm and each third party identified in (6)(b);
(8) where the firm relies on a third party identified in (6)(b), a document which describes how to:
(a) gain access to relevant information held by that third party; and
(b) effect a transfer of any of the client money or safe custody assets held by the firm, but controlled by that third party; and
(9) a copy of the firm's manual in which are recorded its procedures for the management, recording and transfer of the client money and safe custody assets that it holds.
CASS 10.2.2
01/10/2012
FCA
For the purpose of CASS 10.2.1R (4), examples of individuals within the firm who are critical or important to the performance of operational functions include:
(1) those necessary to carry out both internal and external client money and safe custody asset reconciliations; and
(2) those in charge of client documentation for business involving client money and safe custody assets.
CASS 10.2.3
01/10/2012
FCA
For the purpose of CASS 10.2.1R (2), a firm must ensure that the document records:
(1) the full name of the individual institution in question;
(2) the postal and email address and telephone number of that institution; and
(3) the numbers of all accounts opened by that firm with that institution.

CASS 10.3 Existing records forming part of the CASS resolution pack

CASS 10.3.1
01/10/2012
FCA
A firm must include, as applicable, within its CASS resolution pack the records required under:
(1) CASS 6.3.1R (4) (safe custody assets: appropriateness of the firm's selection of a third party);
(2) CASS 6.4.3 R (firm's use of safe custody assets);
(3) CASS 6.5.1 R (safe custody assets held for each client), including internal reconciliations carried out pursuant to CASS 6.5.2 R as explained in the guidance at CASS 6.5.4 G;
(4) CASS 6.5.2A R (client agreements: firm's right to use);
(5) CASS 6.5.6 R (Reconciliations with external records);
(6) CASS 7.4.10 R (client money: appropriateness of the firm's selection of a third party);
(7) CASS 7.6.1 R (client money held for each client), including internal reconciliations carried out pursuant to CASS 7.6.2 R as explained in the guidance at CASS 7.6.6 G;
(8) CASS 7.6.7 R and CASS 7.6.8 R (method of internal reconciliation of client money balances);
(9) CASS 7.6.9 R (Reconciliations with external records);
(10) COBS 3.8.2 R (2)(a) and COBS 3.8.2 R (2)(c) (client categorisation); and
(11) COBS 8.1.4 R (retail and professional client agreements).
CASS 10.3.2
01/10/2012
FCA
CASS 10.3.1 R does not change the record keeping requirements of the rules referred to therein.

CASS 11.1 Application

CASS 11.1.1
01/04/2014
FCA
This chapter (the debt management client money chapter) applies to a CASS debt management firm that receives or holds client money as set out in this chapter.
CASS 11.1.2
01/04/2014
FCA
The requirements imposed on a CASS debt management firm that holds client money vary depending on whether a firm is classified as a CASS small debt management firm or a CASS large debt management firm in CASS 11.2.3 R (CASS debt management firm types). CASS 11.1.4 R to CASS 11.1.6 R indicate which rules in the debt management client money chapter apply to which category of firm.
CASS 11.1.3
01/04/2014
FCA
The debt management client money chapter applies (to the extent indicated by CASS 11.1.4 R to CASS 11.1.6 R) to a CASS debt management firm, even if at the date of the determination or, as the case may be, the notification, referred to in CASS 11.2.4 R, the CASS debt management firm is not holding client money, provided that:
(1) it held client money in the previous calendar year; or
(2) it projects to hold client money in the current calendar year.

Application to CASS small debt management firms

CASS 11.1.4
01/04/2014
FCA
Subject to CASS 11.1.6 R, only the rules and guidance in the debt management client money chapter listed in the table below apply to CASS small debt management firms.
ReferenceRule
CASS 11.1.1 R to CASS 11.1.4 R and CASS 11.1.6 RApplication
CASS 11.2.1 R to CASS 11.2.9 GFirm classification
CASS 11.3.1 R to CASS 11.3.2 R and CASS 11.3.6 RResponsibility for CASS operational oversight
CASS 11.4.1 G to CASS 11.4.4 GDefinition of client money and discharge of fiduciary duty
CASS 11.5.1 R and CASS 11.5.2 ROrganisational requirements
CASS 11.6.1 R and CASS 11.6.2 GStatutory trust
CASS 11.7.1 G and CASS 11.7.5 GSelecting an approved bank at which to hold client money
CASS 11.8.1 G to CASS 11.8.13 RClient bank account acknowledgement letters
CASS 11.9.1 R to CASS 11.9.13 GSegregation and the operation of client money accounts
CASS 11.10.1 R to CASS 11.10.7 GPayments to creditors
CASS 11.11.1 R to CASS 11.11.12 R , CASS 11.11.30 R and CASS 11.11.32 GRecords, accounts and reconciliations
CASS 11.12.1 G to CASS 11.12.7 RCASS 11 resolution pack
CASS 11.13.1 R to CASS 11.13.14 RClient money distribution in the event of a failure of a firm or approved bank

Application to CASS large debt management firms

CASS 11.1.5
01/04/2014
FCA
Subject to CASS 11.1.6 R, the rules and guidance in the debt management client money chapter apply to CASS large debt management firms, except where indicated otherwise in the relevant rule.

Solicitors

CASS 11.1.6
01/04/2014
FCA
(1) An authorised professional firm regulated by the Law Society of England and Wales, the Law Society of Scotland or the Law Society of Northern Ireland that, with respect to its regulated activities, is subject to the following rules of its designated professional body, must comply with those rules and, if it does so, it will be deemed to comply with the debt management client money chapter.
(2) The relevant rules are:
(a) if the firm is regulated by the Law Society of England and Wales, the SRA Accounts Rules 2011;
(b) if the firm is regulated by the Law Society of Scotland, the Law Society of Scotland Practice Rules 2011; and
(c) if the firm is regulated by the Law Society of Northern Ireland, the Solicitors' Accounts Regulations 1998.

CASS 11.2 Firm classification

CASS 11.2.1
01/04/2014
FCA
(1) A CASS debt management firm must, once every year and by the time it is required to make a notification in accordance with CASS 11.2.4 R, determine whether it is a CASS large debt management firm or a CASS small debt management firm according to the amount of client money which it held during the previous year or, if it did not hold client money during the previous year, according to the amount of client money it projects to hold in the following year, in each case using the limits set out in the table in CASS 11.2.3 R.
(2) For the purpose of determining its 'CASS debt management firm type' in accordance with CASS 11.2.3 R, a CASS debt management firm must:
(a) if it currently holds client money, calculate the highest total amount of client money held during the previous calendar year ending on 31 December and use that figure to determine its 'CASS debt management firm type';
(b) if it did not hold client money in the previous calendar year but projects that it will do so in the current calendar year, calculate the highest total amount of client money that it projects that it will hold during that year and use that figure to determine its 'CASS debt management firm type'.
CASS 11.2.2
01/04/2014
FCA
For the purpose of calculating the value of the total amounts of client money that it holds on any given day during a calendar year (in complying with CASS 11.2.1 R) a CASS debt management firm must base its calculation on accurate internal records of client money holdings. A CASS large debt management firm must do this using the internal reconciliations performed during the previous year that are prescribed in CASS 11.11.13 R. A CASS small debt management firm must use the records used in carrying out checks required of it under CASS 11.11.8 R.
CASS 11.2.3
01/04/2014
FCA
CASS debt management firm types
CASS debt management firm typeHighest total amount of client money held during the CASS debt management firm's last calendar year or as the case may be that it projects that it will hold during the current calendar year
CASS large debt management firmAn amount equal to or greater than £1 million
CASS small debt management firmLess than £1 million

Notification

CASS 11.2.4
01/04/2014
FCA
Once every calendar year, a CASS debt management firm must notify the FCA, in writing, of the information in (1), (2) or (3), as applicable, and the information in (4), in each case no later than the day specified in (1) to (4):
(1) if it held client money in the previous calendar year, the highest total amount of client money held during the previous calendar year, notification of which must be made no later than the fifteenth business day of January; or
(2) if it did not hold client money in the previous calendar year but at any point up to the fifteenth business day of January the firm projects that it will do so in the current calendar year, the highest total amount of client money that the firm projects that it will hold during the current calendar year, notification of which must be made no later than the fifteenth business day of January; or
(3) in any other case, the highest total amount of client money that the firm projects that it will hold during the remainder of the current calendar year, notification of which must be made no later than the business day before the firm begins to hold client money; and
(4) in every case, of its 'CASS debt management firm type' classification, notification of which must be made at the same time the firm makes the notification under (1), (2) or (3).
CASS 11.2.5
01/04/2014
FCA
For the purpose of the annual notification in CASS 11.2.4 R, a CASS debt management firm must apply the calculation rule in CASS 11.2.2 R.

Option to be treated as a CASS large debt management firm

CASS 11.2.6
01/04/2014
FCA
CASS 11.2.7 R provides a CASS debt management firm with the ability to opt in to a higher category of 'CASS debt management firm type'. This may be useful for a CASS debt management firm whose holding of client money is near the upper categorisation limit for a CASS small debt management firm.
CASS 11.2.7
01/04/2014
FCA
(1) Notwithstanding CASS 11.2.3 R, provided that the conditions in (2) are satisfied, a CASS debt management firm that would otherwise be classified as a CASS small debt management firm under the limits provided for in CASS 11.2.3 R may elect to be treated as a CASS large debt management firm.
(2) The conditions to which (1) refers are that in either case:
(a) the election is notified to the FCA in writing;
(b) the notification in accordance with (a) is made at least one week before the election is intended to take effect; and
(c) the FCA has not objected.

Effective date of firm type

CASS 11.2.8
01/04/2014
FCA
A firm's 'CASS debt management firm type' and any change to it takes effect:
(1) if the firm notifies the FCA in accordance with CASS 11.2.4 R (1) or CASS 11.2.4 R (2), on 1 February following the notification; or
(2) if the firm notifies the FCA in accordance with CASS 11.2.4 R (3), on the day it begins to hold client money; or
(3) if the firm makes an election under CASS 11.2.7 R and provided the conditions in CASS 11.2.7 R (2) are satisfied, on the day the notification made under CASS 11.2.7 R (2)(a) states that the election is intended to take effect.
CASS 11.2.9
01/04/2014
FCA
Any written notification made to the FCA under this chapter should be marked for the attention of: "Debt Management Client Assets Firm Classification".

CASS 11.3 Responsibility for CASS operational oversight

CASS small debt management firm other than a not-for-profit debt advice body

CASS 11.3.1
01/04/2014
FCA
A CASS small debt management firm, other than a not-for-profit debt advice body, must allocate to a director or senior manager performing a significant-influence function responsibility for:
(1) oversight of the firm's operational compliance with CASS 11;
(2) reporting to the firm's governing body in respect of that oversight; and
(3) completing and submitting a CCR005 return in accordance with SUP 16.12.29C R.

CASS small debt management firm that is a not-for-profit debt advice body

CASS 11.3.2
01/04/2014
FCA
A CASS small debt management firm that is a not-for-profit debt advice body must allocate to a director or senior manager:
(1) oversight of the firm's operational compliance with CASS 11;
(2) reporting to the firm's governing body in respect of that oversight; and
(3) completing and submitting a CCR005 return in accordance with SUP 16.12.29C R.

CASS large debt management firm: the CASS operational oversight function (CF10a)

CASS 11.3.3
01/04/2014
FCA
CASS 11.3.4 R describes the FCA controlled function known as the CASS operational oversight function (CF10a) in relation to CASS large debt management firms, including not-for-profit debt advice bodies. As a consequence of CASS 11.3.4 R (in conjunction with SUP 10A.4.1 R and SUP 10A.7.10 R), in a CASS large debt management firm (including a not-for-profit debt advice body fitting into that category) the function described in CASS 11.3.4 R is required to be discharged by a director or senior manager who is an approved person under the approved persons regime provided for in SUP.
CASS 11.3.4
01/04/2014
FCA
A CASS large debt management firm must allocate to a director or senior manager the function of:
(1) oversight of the operational effectiveness of that CASS debt management firm's systems and controls that are designed to achieve compliance with CASS 11;
(2) reporting to the CASS debt management firm's governing body in respect of that oversight; and
(3) completing and submitting a CCR005 return to the FCA in accordance with SUP 16.12.29C R.
CASS 11.3.5
01/04/2014
FCA
If, at the time a CASS debt management firm becomes a CASS large debt management firm in accordance with CASS 11.2.8 R, the firm is not able to comply with CASS 11.3.4 R because it has no director or senior manager who is an approved person in respect of the CASS operational oversight function, the firm must:
(1) take the necessary steps to ensure that it complies with CASS 11.3.4 R as soon as practicable, which must at least include submitting an application for a candidate in respect of the CASS operational oversight function within 30 business days of the firm becoming a CASS large debt management firm; and
(2) until such time as it is able to comply with CASS 11.3.4 R, allocate to a director or senior manager performing a significant-influence function responsibility for:
(a) oversight of the firm's operational compliance with CASS 11;
(b) reporting to the firm's governing body in respect of that oversight; and
(c) completing and submitting a CCR005 return to the FCA in accordance with SUP 16.12.29C R.

Record of responsibility for CASS operational oversight

CASS 11.3.6
01/04/2014
FCA
(1) Subject to (2), a CASS debt management firm must make and retain an appropriate record of the person to whom responsibility is allocated in accordance with, as applicable, CASS 11.3.1 R, CASS 11.3.2 R, and CASS 11.3.4 R.
(2) A CASS small debt management firm must make and retain such a record only where it allocates responsibility to a person other than the person in that firm who performs the compliance oversight function.
(3) A CASS debt management firm must ensure that a record made under this rule is retained for a period of five years after it is made.

CASS 11.4 Definition of client money and the discharge of fiduciary duty

CASS 11.4.1
01/04/2014
FCA
CASS 11 provides important safeguards for the protection of client money held by CASS debt management firms that sit alongside the fiduciary duty owed by firms in relation to client money. CASS 11.4.2 R to CASS 11.4.4 G provide guidance and rules for when money ceases to be client money for the purposes of both those rules and of the fiduciary duty which CASS debt management firms owe to clients in relation to client money.
CASS 11.4.2
01/04/2014
FCA
Money ceases to be client money if:
(1) it is paid to the client, or a duly authorised representative of the client; or
(2) it is:
(a) paid to a third party on the instruction of the client, or with the specific consent of the client; or
(b) paid to a third party further to an obligation on the firm under any applicable law; or
(3) it is paid into an account of the client (not being an account which is also in the name of the firm) on the instruction, or with the specific consent, of the client;
(4) it is due and payable to the firm for its own account;
(5) it is paid to the firm as an excess in the client bank account (see CASS 11.11.12 R (2) and CASS 11.11.23 R (3)).
CASS 11.4.3
01/04/2014
FCA
When a CASS debt management firm draws a cheque or other payable order to discharge its fiduciary duty to the client, it must continue to treat the sum concerned as client money until the cheque or order is presented and paid.
CASS 11.4.4
01/04/2014
FCA
Money is not client money when it is properly due and payable to the firm for its own account. The circumstances in which money may become due and payable to the firm could include when fees have become due and payable from the client to the firm under the agreement between the client and the firm.

CASS 11.5 Organisational requirements

CASS 11.5.1
01/04/2014
FCA
A CASS debt management firm must, when holding client money, make adequate arrangements to safeguard the client's rights and prevent the use of client money for its own account.
CASS 11.5.2
01/04/2014
FCA
A CASS debt management firm must introduce adequate organisational arrangements to minimise the risk of the loss or diminution of client money, or of rights in connection with client money, as a result of misuse of client money, fraud, poor administration, inadequate record-keeping or negligence.

CASS 11.6 Statutory trust

CASS 11.6.1
01/04/2014
FCA
A CASS debt management firm receives and holds client money as trustee on the following terms:
(1) for the purposes and on the terms of the debt management client money rules and the debt management client money distribution rules;
(2) subject to (3), for the clients for whom that money is held, according to their respective interests in it;
(3) on failure of the CASS debt management firm, for the payment of the costs properly attributable to the distribution of the client money in accordance with (2); and
(4) after all valid claims and costs under (2) and (3) have been met, for the CASS debt management firm itself.
CASS 11.6.2
01/04/2014
FCA
Section 137B(1) of the Act provides that rules may make provisions which result in client money being held by a firm on trust. CASS 11.6.1 R creates such a rule in relation to client money held by a CASS debt management firm. The consequence of this rule is there is a fiduciary relationship between a CASS debt management firm and its client, under which client money is in the legal ownership of the firm but remains in the beneficial ownership of the client. In the event of failure of the CASS debt management firm, costs relating to the distribution of client money may have to be borne by the trust.

CASS 11.7 Selecting an approved bank at which to hold client money

CASS 11.7.1
01/04/2014
FCA
A CASS debt management firm owes a duty of care as a trustee to its clients in relation to client money and has to exercise that duty of care in deciding where to hold client money.
CASS 11.7.2
01/04/2014
FCA
Before a CASS large debt management firm opens a client bank account and as often as is appropriate on a continuing basis (such frequency being no less than once in each financial year) it must take reasonable steps to establish that it is appropriate for the firm to hold client money at the approved bank concerned.
CASS 11.7.3
01/04/2014
FCA
A CASS large debt management firm must consider the risks associated with holding all client money with one approved bank and should consider whether it would be appropriate to hold client money in client bank accounts at a number of different approved banks.
CASS 11.7.4
01/04/2014
FCA
In complying with CASS 11.7.3 R a CASS large debt management firm should consider as appropriate, together with any other relevant matters:
(1) the amount of client money held by the firm;
(2) the amount of client money the firm anticipates holding at the approved bank; and
(3) the credit worthiness of the approved bank.
CASS 11.7.5
01/04/2014
FCA
A CASS small debt management firm can demonstrate compliance with CASS 11.7.1 G by checking that the person it proposes to hold client money with is an approved bank and that nothing has come to the firm's attention to cause it to believe that such person is not an appropriate place at which to hold client money.
CASS 11.7.6
01/04/2014
FCA
A CASS large debt management firm must make a record of the grounds upon which it satisfies itself as to the appropriateness of its selection of an approved bank. The firm must make the record on the date it makes the selection and must keep it from the date of such selection until five years after the firm ceases to use the approved bank to hold client money.

CASS 11.8 Client bank account acknowledgement letters

CASS 11.8.1
01/04/2014
FCA
The main purposes of a client bank account acknowledgement letter are:
(1) to put the approved bank on notice of a firm's clients' interests in client money that has been deposited with such person;
(2) to ensure that the client bank account has been opened in accordance with CASS 11.9.3 R, and is distinguished from any account containing money that belongs to the firm; and
(3) to ensure that the approved bank understands and agrees that it will not have any recourse or right against money standing to the credit of the client bank account, in respect of any liability of the firm to such person (or person connected to such person).
CASS 11.8.2
01/04/2014
FCA
(1) For each client bank account, a CASS debt management firm must, in accordance with CASS 11.8.4 R, complete and sign a client bank account acknowledgement letter clearly identifying the client bank account, and send it to the approved bank with whom the client bank account is, or will be, opened, requesting the bank to acknowledge and agree to the terms of the letter by countersigning it and returning it to the firm.
(2) Subject to CASS 11.8.6 R, a CASS debt management firm must not hold or receive any client money in or into a client bank account unless it has received a duly countersigned client bank account acknowledgement letter from the approved bank that has not been inappropriately redrafted and clearly identifies the client bank account.
CASS 11.8.3
01/04/2014
FCA
In drafting client bank account acknowledgement letters under CASS 11.8.2 R a CASS debt management firm is required to use the relevant template in CASS 11 Annex 1 R.
CASS 11.8.4
01/04/2014
FCA
When completing a client bank account acknowledgement letter under CASS 11.8.2 R (1) a CASS debt management firm:
(1) must not amend any of the acknowledgement letter fixed text;
(2) subject to (3), must ensure the acknowledgement letter variable text is removed, included or amended as appropriate; and
(3) must not amend any of the acknowledgement letter variable text in a way that would alter or otherwise change the meaning of the acknowledgement letter fixed text.
CASS 11.8.5
01/04/2014
FCA
CASS 11 Annex 2 contains guidance on using the template client bank account acknowledgement letters, including on when and how firms should amend the acknowledgement letter variable text that is in square brackets.
CASS 11.8.6
01/04/2014
FCA
(1) If, on countersigning and returning the client bank account acknowledgement letter to a firm, the relevant approved bank has also:
(a) made amendments to any of the acknowledgement letter fixed text; or
(b) made amendments to any of the acknowledgement letter variable text in a way that would alter or otherwise change the meaning of the acknowledgement letter fixed text;
the client bank account acknowledgement letter will have been inappropriately redrafted for the purposes of CASS 11.8.2 R (2).
(2) Amendments made to the acknowledgement letter variable text, in the client bank account acknowledgement letter returned to a firm by the relevant approved bank, will not have the result that the letter has been inappropriately redrafted if those amendments do not affect the meaning of the acknowledgement letter fixed text, have been specifically agreed with the firm and do not cause the client bank account acknowledgement letter to be inaccurate.
CASS 11.8.7
01/04/2014
FCA
A CASS debt management firm must use reasonable endeavours to ensure that any individual that has countersigned a client bank account acknowledgement letter that has been returned to the firm was authorised to countersign the letter on behalf of the relevant approved bank.
CASS 11.8.8
01/04/2014
FCA
A CASS debt management firm must retain each countersigned client bank account acknowledgement letter it receives from the date of receipt until the expiry of a period of five years starting on the date on which the last client bank account to which the acknowledgment letter relates is closed.
CASS 11.8.9
01/04/2014
FCA
A CASS debt management firm must also retain any other documentation or evidence it believes is necessary to demonstrate that it has complied with each of the applicable requirements in this section (such as any evidence it has obtained to ensure that the individual that has countersigned a client bank account acknowledgement letter that has been returned to the firm was authorised to countersign the letter on behalf of the relevant approved bank).
CASS 11.8.10
01/04/2014
FCA
A CASS debt management firm must, periodically (at least annually, and whenever it becomes aware that something referred to in a client bank account acknowledgement letter has changed) review each of its countersigned client bank account acknowledgement letters to ensure that they remain accurate.
CASS 11.8.11
01/04/2014
FCA
Whenever a CASS debt management firm finds a countersigned client bank account acknowledgement letter to contain an inaccuracy, the firm must promptly draw up a new replacement client bank account acknowledgement letter under CASS 11.8.2 R and ensure that the new client bank account acknowledgement letter is duly countersigned and returned by the relevant approved bank.
CASS 11.8.12
01/04/2014
FCA
Under CASS 11.8.10 R, a CASS debt management firm should obtain a replacement client bank account acknowledgement letter whenever:
(1) there has been a change in any of the parties' names or addresses or a change in any of the details of the relevant account(s) as set out in the letter; or
(2) it becomes aware of an error or misspelling in the letter.
CASS 11.8.13
01/04/2014
FCA
If a CASS debt management firm's client bank account is transferred to another approved bank, the firm must promptly draw up a new client bank account acknowledgement letter under CASS 11.8.2 R and ensure that the new client bank account acknowledgement letter is duly countersigned and returned by the relevant approved bank within 20 business days of the firm sending it to that person.

CASS 11.9 Segregation and the operation of client money accounts

Requirement to segregate

CASS 11.9.1
01/04/2014
FCA
A CASS debt management firm must take all reasonable steps to ensure that all client money it receives is paid directly into a client bank account at an approved bank, rather than being first received into the firm's own account and then segregated.
CASS 11.9.2
01/04/2014
FCA
A CASS debt management firm should arrange for clients and third parties to make transfers and payments of any money which will be client money directly into the firm's client bank accounts.
CASS 11.9.3
01/04/2014
FCA
A CASS debt management firm must ensure that client money is held in a client bank account at one or more approved banks.
CASS 11.9.4
01/04/2014
FCA
Cheques received by a CASS debt management firm, made out to the firm, representing client money or a mixed remittance must be treated as client money from receipt by the firm.
CASS 11.9.5
01/04/2014
FCA
Where a CASS debt management firm receives client money in the form of cash, a cheque or other payable order, it must:
(1) pay the money into a client bank account in accordance with CASS 11.9.1 R promptly and no later than on the business day after it receives the money;
(2) if the firm holds the money overnight, hold it in a secure location in line with Principle 10; and
(3) record the receipt of the money in the firm's books and records under the applicable requirements of CASS 11.11 (Records, accounts and reconciliations).

Mixed remittance

CASS 11.9.6
01/04/2014
FCA
If a CASS debt management firm receives a mixed remittance it must:
(1) pay the full sum into a client bank account promptly and in accordance with CASS 11.9.1 R to CASS 11.9.5 R; and
(2) no later than one business day after the payment of the mixed remittance into the client bank account has cleared, pay the money that is not client money out of the client bank account.

Allocation of client money receipts

CASS 11.9.7
01/04/2014
FCA
(1) A CASS debt management firm must allocate in its books and records any client money it receives to an individual client promptly and, in any case, no later than five business days following the receipt.
(2) Pending a CASS debt management firm's allocation of a client money receipt to an individual client under (1), it must record the received client money in its books and records as "unallocated client money".
CASS 11.9.8
01/04/2014
FCA
If a CASS debt management firm receives money (either in a client bank account or an account of its own) which it is unable immediately to identify as client money or its own money, it must:
(1) take all necessary steps to identify the money as either client money or its own money;
(2) if it considers it reasonably prudent to do so, given the risk that client money may not be adequately protected if it is not treated as such, treat the entire balance of money as client money and record the money in its books and records as "unidentified client money" while it performs the necessary steps under (1).
CASS 11.9.9
01/04/2014
FCA
If a CASS debt management firm is unable to identify money that it has received as either client money or its own money under CASS 11.9.8 R (1), it should consider whether it would be appropriate to return the money to the person who sent it (or, if that is not possible, to the source from where it was received, for example, the bank). A firm should have regard to its fiduciary duties when considering such matters.

Money received by appointed representatives, tied agents, field representatives and other agents

CASS 11.9.10
01/04/2014
FCA
A CASS debt management firm must ensure that client money received by its appointed representatives, field representatives or other agents is:
(1) received directly into a client bank account of the firm; or
(2) if it is received in the form of a cheque or other payable order:
(a) paid into a client bank account of the CASS debt management firm promptly and, in any event, no later than the next business day after receipt; or
(b) forwarded to the firm or, in the case of a field representative, forwarded to a specified business address of the CASS debt management firm, to ensure that the money arrives at the specified business address promptly and, in any event, no later than the close of the third business day following the receipt of the money from the client; or
(3) if it is received in the form of cash, paid into a client bank account of the CASS debt management firm promptly and, in any event, no later than the next business day after receipt.

Interest

CASS 11.9.11
01/04/2014
FCA
A CASS debt management firm must pay a client any interest earned on client money held for that client.

Returning money to clients

CASS 11.9.12
01/04/2014
FCA
A CASS debt management firm must, on receipt of a written request to withdraw from a debt management plan, promptly return to the client any client money held by it for the client.
CASS 11.9.13
01/04/2014
FCA
The FCA would expect compliance with the requirement in CASS 11.9.12 R to return client money promptly to require client money to be returned to a client within five business days of the date on which a client's withdrawal from a debt management plan takes effect.

CASS 11.10 Payments to creditors

CASS 11.10.1
01/04/2014
FCA
Where a CASS debt management firm receives client money from a client in relation to a debt management plan or for the purpose of distribution to the client's creditors, the firm must pay that money to creditors as soon as reasonably practicable, save in the circumstances in CASS 11.10.3 R.
CASS 11.10.2
01/04/2014
FCA
In the FCA's view, the payment to creditors under CASS 11.10.1 R should normally be within five business days of the receipt of cleared funds.
CASS 11.10.3
01/04/2014
FCA
The circumstances referred to in CASS 11.10.1 R are:
(1) the contract between the client and the CASS debt management firm expressly provides that client money might be held for more than five business days without being distributed to creditors;
(2) the existence of such a term expressly providing that client money might be held for more than five business days without being distributed to creditors has been separately brought to the attention of the client prior to his entering into the contract; and
(3) the CASS debt management firm has explained to the client the risks and implications, if any, of payment to creditors being delayed prior to the entry into the contract.
CASS 11.10.4
01/04/2014
FCA
On each occasion that a CASS debt management firm receives client money from a client in relation to a debt management plan, or for the purpose of distribution to the client's creditors, and it is proposed not to make a client's payment to creditors within five business days of receipt of the client money in the circumstances described in CASS 11.10.3 R (1), it must:
(1) as soon as reasonably practicable and within the five business day period, inform the client's creditors of the fact that it has received client money from the client for the purpose of distribution to his or her creditors and that it will not distribute that client money to the creditors within the five business-day period; and
(2) perform daily reconciliations of the money held for the client concerned in accordance with the provisions of CASS 11.11.
CASS 11.10.5
01/04/2014
FCA
On each occasion a CASS debt management firm receives client money from a client in relation to a debt management plan, or for the purpose of distribution to the client's creditors, and is unable for any reason other than in the circumstances described in CASS 11.10.3 R (1) to make a payment to the client's creditors within five business days of receipt, it must:
(1) inform the client of the delay and the reason for the delay;
(2) inform the client of the risks and implications of the late payments;
(3) inform the client's creditors of this delay as soon as reasonably practicable and within the period of five business days of the receipt of the relevant client money; and
(4) perform daily checks of its records of the money held for the client concerned in accordance with the provisions of CASS 11.11.
CASS 11.10.6
01/04/2014
FCA
(1) Subject to (2), where a CASS debt management firm receives client money from a client in relation to a debt management plan or for the purpose of distribution to the client's creditors, and it fails to pay that money to creditors as soon as reasonably practicable following its receipt (see CASS 11.10.1 R and CASS 11.10.2 G), it must put the client into the financial position he would have been in had the delay not occurred.
(2) Paragraph (1) does not apply in the circumstances described in CASS 11.10.3 R or where the delay is due to circumstances beyond the firm's control.
CASS 11.10.7
01/04/2014
FCA
Putting a client into the position he would have been in had the delay not occurred under CASS 11.10.6 R should include paying to the client a sum equivalent to the amount of any additional interest which would not have accrued but for the delay and any default charges that have been applied to the account as a result of the delay.

CASS 11.11 Records, accounts and reconciliations

Records and accounts

CASS 11.11.1
01/04/2014
FCA
A CASS debt management firm must keep such records and accounts as are necessary to enable it, at any time and without delay, to distinguish client money held for one client from client money held for any other client, and from its own money.
CASS 11.11.2
01/04/2014
FCA
In accordance with CASS 11.11.1 R, a CASS debt management firm must maintain internal records and accounts of the client money it holds (for example, a cash book). These internal records are separate to any external records it has obtained from approved banks with whom it has deposited client money (for example, bank statements).
CASS 11.11.3
01/04/2014
FCA
A CASS debt management firm must maintain its records and accounts in a way that ensures their accuracy and, in particular, their correspondence to the client money held for individual clients.
CASS 11.11.4
01/04/2014
FCA
A CASS debt management firm must maintain up-to-date records that detail all payments to, from, or made on behalf of, clients and written and oral contact with clients and their creditors.

Policies and procedures

CASS 11.11.5
01/04/2014
FCA
CASS debt management firms are reminded that they must, under SYSC 6.1.1 R, establish, implement and maintain adequate policies and procedures sufficient to ensure compliance of the firm with the rules in this chapter.

Checks and reconciliations of internal records

CASS 11.11.6
01/04/2014
FCA
So that a CASS debt management firm may check that it has sufficient money segregated in its client bank accounts to meet its obligations to clients for whom it is undertaking debt management activity, it is required periodically to carry out reconciliations of its internal records and accounts to check that the total amount of client money that it should have segregated in client bank accounts is equal to the total amount of client money it actually has segregated in client bank accounts. CASS 11.11.8 R to CASS 11.11.23 R provide rules that the different types of CASS debt management firm are obliged to follow to meet this obligation.

Checks of internal records: CASS small debt management firm

CASS 11.11.7
01/04/2014
FCA
For a CASS small debt management firm to demonstrate it has maintained its records and accounts in a way envisaged by CASS 11.11.3 R, it should carry out checks of its internal records and accounts that are reasonable and proportionate to its business. CASS 11.11.8 R provides a rule that a CASS small debt management firm is obliged to follow to meet this obligation.
CASS 11.11.8
01/04/2014
FCA
A CASS small debt management firm must undertake periodic checks of its internal accounts and records to ensure that the amount of money it holds in its client bank accounts is equal to the amount of client money that should be segregated under CASS 11.9.
CASS 11.11.9
01/04/2014
FCA
In carrying out the checks required by CASS 11.11.8 R a CASS small debt management firm must use the values contained in its internal records and ledgers (for example, its cash book or other internal accounting records), rather than the values contained in the records it has obtained from approved banks with whom it has deposited client money (for example, bank statements).
CASS 11.11.10
01/04/2014
FCA
The checks that a CASS small debt management firm is required to undertake under CASS 11.11.8 R include checking that its internal records and accounts accurately record the balances of client money held in respect of individual clients, and that the aggregate of those individual client money balances are equal to the total client money segregated in its client bank accounts. In undertaking the comparison between the internal records of balances of client money and the client money segregated in client bank accounts, a firm should use the previous day's closing client money balances and should compare those with other records relating to the same day. In determining an appropriate frequency for its record checks, a firm should consider the volume and frequency of transactions in its client bank accounts.
CASS 11.11.11
01/04/2014
FCA
In seeking to comply with its obligation to carry out checks on its internal records and accounts, a CASS small debt management firm may choose to follow the steps specifically required of CASS large debt management firms in undertaking a CASS large debt management firm internal client money reconciliation and CASS large debt management firm external client money reconciliation. A CASS small debt management firm which follows that procedure is likely to be regarded by the FCA as having fulfilled its obligation under CASS 11.11.8 R.

CASS small debt management firms: remedying discrepancies

CASS 11.11.12
01/04/2014
FCA
Where the check of its internal records and accounts that a CASS small debt management firm is required to undertake under CASS 11.11.8 R reveals a difference between the amount of money it holds in its client bank accounts and the amount of client money that should be held and segregated under CASS 11.9, a CASS small debt management firm must:
(1) ensure that any shortfall in the amount held in its client bank accounts as compared to the amount that should be held there is made up by a prompt payment into the firm's client bank accounts;
(2) ensure that any excess in the amount held in its client bank accounts as compared to the amount that should be held there is promptly withdrawn from its client bank accounts; and
(3) ensure that any correction of a shortfall or excess of the kind referred to in (1) and (2) is carried out, at the latest, before the end of the business day following the day on which difference was discovered.

CASS large debt management firms internal client money reconciliation

CASS 11.11.13
01/04/2014
FCA
A CASS large debt management firm must, as regularly as is necessary, but no less often than every five business days, carry out a CASS large debt management firm internal client money reconciliation.
CASS 11.11.14
01/04/2014
FCA
A CASS large debt management firm internal client money reconciliation requires a CASS large debt management firm to check whether its client money resource, as determined by CASS 11.11.16 R, on the previous business day, was at least equal to the client money requirement, as determined by CASS 11.11.17 R as at the close of business on that day.
CASS 11.11.15
01/04/2014
FCA
In carrying out a CASS large debt management firm internal client money reconciliation, a CASS large debt management firm must use the values contained in its internal records and ledgers (for example, its cash book or other internal accounting records), rather than the values contained in the records it has obtained from approved banks with whom it has deposited client money (for example, bank statements).

Calculating the client money resource

CASS 11.11.16
01/04/2014
FCA
The client money resource for client money held in accordance with CASS 11.11.14 R is the aggregate of the balances on the firm's client bank accounts, as at the close of business on the previous business day.

Calculating the client money requirement

CASS 11.11.17
01/04/2014
FCA
(1) The client money requirement is the sum of:
(a) the aggregate of all individual client balances calculated in accordance with CASS 11.11.21 R and CASS 11.11.22 R;
(b) the amount of any unallocated client money under CASS 11.9.7 R;
(c) the amount of any unidentified client money under CASS 11.9.8 R; and
(d) any other amounts of client money included in the calculation under (2).
(2) For the purposes of (1)(d), the CASS debt management firm must consider whether there are amounts of client money, other than those in (1)(a) to (c), to which the requirement to segregate applies and that it is appropriate to include in the calculation of its client money requirement and, if so, adjust the calculation accordingly.
CASS 11.11.18
01/04/2014
FCA
The client money requirement calculated in accordance with CASS 11.11.17 R should represent the total amount of client money a CASS debt management firm is required to have segregated in client bank accounts under the debt management client money chapter.
CASS 11.11.19
01/04/2014
FCA
Firms are reminded that, under CASS 11.4.3 R, if a firm has drawn any cheques, or other payable orders, to discharge its fiduciary duty to its clients (for example, to return client money to the client or distribute it to the client's creditors), the sum concerned must be included in the firm's calculation of its client money requirement until the cheque or order is presented and paid.
CASS 11.11.20
01/04/2014
FCA
The following guidance applies where a CASS debt management firm receives client money in the form of cash, a cheque or other payable order:
(1) In carrying out the calculation of the client money requirement, a CASS debt management firm may initially include the amount of client money received as cash, cheques or payment orders that has not yet been deposited in a client bank account in line with CASS 11.9.5 R. If it does so, the firm should ensure, before finalising the calculation, that it deducts these amounts to avoid them giving rise to a difference between the firm's client money requirement and client money resource.
(2) In carrying out the calculation of the client money requirement, a CASS debt management firm may alternatively exclude the amount of client money received as cash, cheques or payment orders that has not yet been deposited in a client bank account in line with CASS 11.9.5 R. If it does so, the firm is reminded that it must separately record the receipt of the money in the firm's books and records under CASS 11.9.5 R (3).
(3) A CASS debt management firm that receives client money in the form of cash, a cheque or other payable order is reminded that it must pay that money into a client bank account promptly and no later than on the business day after it receives the money (see CASS 11.9.5 R).
CASS 11.11.21
01/04/2014
FCA
The individual client balance for each client must be calculated as follows:
(1) the amount paid by the client to the CASS debt management firm; plus
(2) the amount of any interest, and any other sums, due to the client;
less:
(3) the aggregate of the amount of money:
(a) paid back to that client; and
(b) due and payable by the client to the CASS debt management firm; and
(c) paid out to a third party for, or on behalf of, that client.
CASS 11.11.22
01/04/2014
FCA
Where the individual client balance calculated in respect of an individual client under CASS 11.11.21 R is a negative figure (because the amounts paid by or due to a client under CASS 11.11.21 R (1) and CASS 11.11.21 R (2) are less than the amounts paid out or due and payable by that client under CASS 11.11.21 R (3), that individual client balance should be treated as zero for the purposes of the calculation of the firm's client money requirement in CASS 11.11.17 R.

Large debt management firms: reconciliation differences and discrepancies

CASS 11.11.23
01/04/2014
FCA
When a CASS large debt management firm internal client money reconciliation reveals a difference between the client money resource and its client money requirement a CASS large debt management firm must:
(1) identify the reason for the difference;
(2) ensure that any shortfall in the amount of the client money resource as compared to the amount of the client money requirement is made up by a payment into the firm's client bank accounts by the end of the business day following the day on which difference was discovered; and
(3) ensure that any excess in the amount of the client money resource as compared to the amount of the client money requirement is withdrawn from the firm's client bank accounts by the end of the business day following the day on which the difference was discovered.

CASS large debt management firm external client money reconciliation

CASS 11.11.24
01/04/2014
FCA
The purpose of the reconciliation process required by CASS 11.11.25 R is to ensure the accuracy of a firm's internal accounts and records against those of any third parties by whom client money is held.
CASS 11.11.25
01/04/2014
FCA
A CASS large debt management firm should perform a CASS large debt management firm external client money reconciliation:
(1) as regularly as is necessary; and
(2) no less frequently than the CASS large debt management firm internal client money reconciliations; and
(3) as soon as reasonably practicable after the date to which the reconciliation relates;
to ensure the accuracy of its internal accounts and records against those of approved banks with whom client money is deposited.
CASS 11.11.26
01/04/2014
FCA
A CASS large debt management firm external client money reconciliation requires a CASS large debt management firm to conduct a reconciliation between its internal accounts and records and those of any approved banks by whom client money is held.
CASS 11.11.27
01/04/2014
FCA
The FCA expects a CASS large debt management firm which carries out transactions for its clients on a daily basis to carry out a CASS large debt management firm external client money reconciliation on a daily basis.
CASS 11.11.28
01/04/2014
FCA
When any discrepancy is revealed by a CASS large debt management firm external client money reconciliation, a CASS large debt management firm must identify the reason for the discrepancy and correct it as soon as possible, unless the discrepancy arises solely as a result of timing differences between the accounting systems of the party providing the statement or confirmation and that of the firm.
CASS 11.11.29
01/04/2014
FCA
While a CASS large debt management firm is unable to resolve a discrepancy arising from the CASS large debt management firm external client money reconciliation, and one record or a set of records examined by the firm during the reconciliation process indicates that there is a need to have greater amount of client money than is in fact the case, the firm must assume, until the matter is finally resolved, that the record or set of records is accurate and pay its own money into a relevant account.

Notification requirements

CASS 11.11.30
01/04/2014
FCA
A CASS debt management firm must inform the FCA in writing without delay if:
(1) its internal records and accounts of client money are materially out of date or materially inaccurate so that the firm is no longer able to comply with the requirements in CASS 11.11.1 R to CASS 11.11.4 R; or
(2) it becomes aware that, at any time in the preceding 12 months, the amount of client money segregated in its client bank accounts materially differed from the total aggregate amount of client money the firm was required to segregate in client bank accounts in accordance with the segregation requirements in CASS 11.9.
CASS 11.11.31
01/04/2014
FCA
A CASS large debt management firm must inform the FCA in writing without delay if:
(1) after having carried out a CASS large debt management firm internal client money reconciliation in accordance with CASS 11.11.13 R it will be unable to, or materially fails to, pay any shortfall into (or withdraw any excess from) a client bank account so that the firm is unable to comply with CASS 11.11.23 R;
(2) after having carried out a CASS large debt management firm external client money reconciliation in accordance with CASS 11.11.25 R it will be unable to, or materially fails to, identify and correct any discrepancies in accordance with CASS 11.11.28 R;
(3) it will be unable to or materially fails to conduct a CASS large debt management firm internal client money reconciliation in compliance with CASS 11.11.13 R; or
(4) it will be unable to or materially fails to conduct a CASS large debt management firm external client money reconciliation in compliance with CASS 11.11.25 R.
CASS 11.11.32
01/04/2014
FCA
CASS debt management firms are also reminded of their obligation to notify the appropriate regulator of a significant breach of a rule under SUP 15.3.11 R.

CASS 11.12 CASS 11 resolution pack

CASS 11.12.1
01/04/2014
FCA
The purpose of the CASS 11 resolution pack is to ensure that a firm maintains and is able to retrieve information that would, in the event of its insolvency, assist an insolvency practitioner in dealing with client money in a timely manner.
CASS 11.12.2
01/04/2014
FCA
A CASS debt management firm which holds client money must maintain at all times and be able to retrieve, in the manner described in this section, a CASS 11 resolution pack.
CASS 11.12.3
01/04/2014
FCA
A CASS debt management firm must include within its CASS 11 resolution pack all those documents referred to in CASS 11.12.4 R.
CASS 11.12.4
01/04/2014
FCA
The documents in CASS 11.12.3 R that a CASS debt management firm must include within its CASS 11 resolution pack are:
(1) a master document containing information sufficient to retrieve each document in the firm's CASS 11 resolution pack;
(2) a document which identifies all the approved banks with whom client money may be deposited;
(3) a document which identifies each appointed representative, field representative or other agent of the firm which may receive client money in its capacity as the firm's agent;
(4) a document which identifies each senior manager and director and any other individual and the nature of their responsibility within the firm who is critical or important to the performance of operational functions related to any of the obligations imposed on the firm under the debt management client money rules;
(5) for all approved banks identified in (2) the written client bank account acknowledgement letters sent and received in accordance with CASS 11.8.2 R; and
(6) records relating to the internal and external client money checks it is required to carry out under CASS 11.11.
CASS 11.12.5
01/04/2014
FCA
In relation to each document in a CASS debt management firm's CASS 11 resolution pack a firm must:
(1) put in place adequate arrangements to ensure that an administrator, receiver, trustee, liquidator or analogous officer appointed in respect of it or any material part of its property is able to retrieve each document as soon as practicable and, in any event, within 48 hours of that officer's appointment; and
(2) ensure that it is able to retrieve each document as soon as practicable and, in any event, within 48 hours where it has taken a decision to do so or as a result of an FCA request.
CASS 11.12.6
01/04/2014
FCA
(1) A CASS debt management firm must ensure that it reviews the content of its CASS 11 resolution pack on an ongoing basis to ensure that it remains accurate.
(2) In relation to any change of circumstances that has the effect of rendering inaccurate, in any material respect, the content of a document specified in CASS 11.12.4 R, a firm must ensure that any inaccuracy is corrected promptly and in any event no more than five business days after the change of circumstances arose.
CASS 11.12.7
01/04/2014
FCA
A CASS debt management firm must notify the FCA in writing immediately if it has not complied with, or is unable to comply with, CASS 11.12.2 R and CASS 11.12.6 R.

CASS 11.13 Client money distribution in the event of a failure of a firm or approved bank

Application

CASS 11.13.1
01/04/2014
FCA
This section (the debt management client money distribution rules) applies to a CASS debt management firm that holds client money which is subject to the debt management client money rules when a primary pooling event or a secondary pooling event occurs.

Purpose

CASS 11.13.2
01/04/2014
FCA
The debt management client money distribution rules seek, in the event of the failure of a CASS debt management firm or of an approved bank at which the CASS debt management firm holds client money, to protect client money and to facilitate the timely payment of sums to creditors or the timely return of client money to clients.

Failure of a CASS debt management firm: primary pooling event

CASS 11.13.3
01/04/2014
FCA
A primary pooling event occurs:
(1) on the failure of a CASS debt management firm;
(2) on the vesting of assets in a trustee in accordance with an 'assets requirement' imposed under section 55P(1)(b) or (c) (as the case may be) of the Act where such a requirement is imposed in respect of all client money held by the firm.

Pooling and distribution after a primary pooling event

CASS 11.13.4
01/04/2014
FCA
If a primary pooling event occurs:
(1) all client money:
(a) held in the CASS debt management firm's client bank accounts; and
(b) received by the CASS debt management firm on behalf of a client but not yet paid into the firm's client bank accounts;
(2) a CASS debt management firm must calculate the amount it should be holding on behalf of each individual client as at the time of the primary pooling event using the method of calculating individual client balance provided for by CASS 11.11.21 R;
(3) a CASS debt management firm must decide whether it is in the best interests of its clients to transfer all its debt management activity business to another CASS debt management firm.

Distribution if client money not transferred to another firm

CASS 11.13.5
01/04/2014
FCA
Where a primary pooling event occurs and the client money is not transferred to another firm in accordance with CASS 11.13.4 R, a CASS debt management firm must distribute client money comprising the notional pool so that each client receives a sum that is rateable to their entitlement to the notional pool calculated in CASS 11.13.4 R (2).

Transfer of client money to another firm

CASS 11.13.6
01/04/2014
FCA
If in the event of a primary pooling event occurring the debt management activity business undertaken by a CASS debt management firm ("the transferor") is to be transferred to another CASS debt management firm ("the transferee"), then the transferor may also move the client money associated with that business to the transferee.
CASS 11.13.7
01/04/2014
FCA
The remaining client money may be transferred under CASS 11.13.6 G only if it will be held by the transferee in accordance with the debt management client money chapter, including the statutory trust in CASS 11.6.1 R.
CASS 11.13.8
01/04/2014
FCA
If there is a shortfall in the client money transferred under CASS 11.13.6 G then the client money must be allocated to each of the clients for whom the client money was held so that each client is allocated a sum which is rateable to that client's client money entitlement in accordance with CASS 11.13.4 R (2). This calculation may be done by either transferor or transferee in accordance with the terms of any transfer.
CASS 11.13.9
01/04/2014
FCA
The transferee must, within seven days after the transfer of client money under CASS 11.13.6 G notify clients that:
(1) their money has been transferred to the transferee; and
(2) they have the option of having client money returned to them or to their order by the transferee, otherwise the transferee will hold the client money for the clients and conduct debt management activities for those clients.

Failure of an approved bank: secondary pooling event

CASS 11.13.10
01/04/2014
FCA
A secondary pooling event occurs on the failure of an approved bank at which a CASS debt management firm holds client money in a client bank account.
CASS 11.13.11
01/04/2014
FCA
(1) Subject to (2), if a secondary pooling event occurs as a result of the failure of an approved bank where one or more client bank accounts are held then in relation to every client bank account of the firm, the provisions of CASS 11.13.12 R (1), CASS 11.13.12 R (2) and CASS 11.13.12 R (3) will apply.
(2) CASS 11.13.12 R does not apply if, on the failure of the approved bank, the CASS debt management firm pays to its clients, or pays into a client bank account at an unaffected approved bank, an amount equal to the amount of client money that would have been held if a shortfall had not occurred as a result of the failure.
CASS 11.13.12
01/04/2014
FCA
Money held in each client bank account of the firm must be treated as pooled and:
(1) any shortfall in client money held, or which should have been held, in client bank accounts, that has arisen as a result of the failure of the approved bank, must be borne by all clients whose client money is held in a client bank account of the firm, rateably in accordance with their entitlements to the pool;
(2) a new client money entitlement must be calculated for each client by the firm, to reflect the requirements in (1), and the firm's records must be amended to reflect the reduced client money entitlement;
(3) the CASS debt management firm must make and retain a record of each client's share of the client money shortfall at the failed approved bank until the client is repaid; and
(4) the firm must use the new client entitlements, calculated in accordance with (2), when performing the client money calculation in CASS 11.11.17 R.
CASS 11.13.13
01/04/2014
FCA
The term 'which should have been held' is a reference to the failed approved bank's failure to hold the client money at the time of the pooling event.
CASS 11.13.14
01/04/2014
FCA
Any interest earned on client money following a primary or secondary pooling event will be due to clients in accordance with CASS 11.9.11 R (Interest).

CASS 11 Annex 1 CASS debt management firm client bank account acknowledgement letter template

CASS 11 Annex 1
01/04/2014
FCA
This annex consists only of one or more forms. Forms are to be found through the following address:

CASS debt management firm client bank account acknowledgment letter template - CASS 11 Annex 1 R

CASS 11 Annex 2 Guidance notes for client bank account acknowledgement letters (CASS 11.8.5G)

CASS 11 Annex 2
01/04/2014
FCA
Introduction
 1. This annex contains guidance on the use of the template client bank account acknowledgement letters in CASS 11 Annex 1.


General
 
2. Under CASS 11.8.2 R (2), CASS debt management firms are required to have in place a duly signed and countersigned client bank account acknowledgement letter for a client bank account before they are allowed to hold or receive client money in or into the account.
 
3. For each client bank account a CASS debt management firm is required to complete, sign and send to the approved bank a client bank account acknowledgement letter identifying that account and in the form set out in CASS 11 Annex 1 (CASS debt management firm client bank account acknowledgment letter template).
 
4 . When completing a client bank account acknowledgement letter using the appropriate template, a CASS debt management firm is reminded that it must not amend any of the text which is not in square brackets (acknowledgment letter fixed text). A CASS debt management firm should also not amend the non-italicised text that is in square brackets. It may remove or include square bracketed text from the letter, or replace bracketed and italicised text with the required information, in either case as appropriate. The notes below give further guidance on this.


Clear identification of relevant accounts
 
5. A CASS debt management firm is reminded that for each client bank account it needs to have in place a client bank account acknowledgement letter. As a result, it is important that it is clear to which account or accounts each client bank account acknowledgement letter relates. As a result, the templates in CASS 11 Annex 1 require that the client bank account acknowledgement letter include the full title and at least one unique identifier, such as a sort code and account number, deposit number or reference code, for each client bank account.
 
6. The title and unique identifiers included in a client bank account acknowledgement letter for a client bank account should be the same as those reflected in both the records of the CASS debt management firm and the relevant approved bank, as appropriate, for that account. Where an approved bank's systems are not able to reflect the full title of an account, that title may be abbreviated to accommodate that system, provided that:
 (a) the account may continue to be appropriately identified in line with the requirements of CASS 11 (for example, 'segregated' may be shortened to 'seg', 'account' may be shortened to 'acct' etc); and
 (b) when completing a client bank account acknowledgement letter, such letter must include both the long and short versions of the account title.
 7. A CASS debt management firm should ensure that all relevant account information is contained in the space provided in the body of the client bank account acknowledgement letter. Nothing should be appended to a client bank account acknowledgement letter.
 8. In the space provided in the template letters for setting out the account title and unique identifiers for each relevant account/deposit, a CASS debt management firm firm may include the required information in the format of the following table:
Full account titleUnique identifierTitle reflected in [name of approved bank] systems
[Debt Management Firm Client Bank Account][00-00-00 12345678][DM FIRM CLIENT A/C]
   
   
   

 9. Where a client bank account acknowledgement letter is intended to cover a range of client bank accounts, some of which may not exist as at the date the client bank account acknowledgement letter is countersigned by the approved bank, a CASS debt management firm should set out in the space provided in the body of the client bank account acknowledgement letter that it is intended to apply to all present and future accounts which: (a) are titled in a specified way (e.g. with the word 'client' in their title); and (b) which possess a common unique identifier or which may be clearly identified by a range of unique identifiers (e.g. all accounts numbered between XXXX1111 and ZZZZ9999). For example, in the space provided in the template letter in CASS 11 Annex 1 which allows a CASS debt management firm to include the account title and a unique identifier for each relevant account, a CASS debt management firm should include a statement to the following effect:
 Any account open at present or to be opened in the future which contains the term ['client'][insert appropriate abbreviation of the term 'client' as agreed and to be reflected in the Approved Bank's systems] in its title and which may be identified with [the following [insert common unique identifier]][an account number from and including [XXXX1111] to and including [ZZZZ9999]][clearly identify range of unique identifiers].


Signatures and countersignatures
 10. A CASS debt management firm should ensure that each client bank account acknowledgement letter is signed and countersigned by all relevant parties and individuals (including where a firm or the approved bank may require more than one signatory).
 11. A client bank account acknowledgement letter that is signed or countersigned electronically should not, for that reason alone, result in a breach of the rules in CASS 11.8. However, where electronic signatures are used, a CASS debt management firm should consider whether, taking into account the governing law and choice of competent jurisdiction, it needs to ensure that the electronic signature and the certification by any person of such signature would be admissible as evidence in any legal proceedings in the relevant jurisdiction in relation to any question as to the authenticity or integrity of the signature or any associated communication.


Completing a client bank account acknowledgment letter
 12. A CASS debt management firm should use at least the same level of care and diligence when completing a client bank account acknowledgement letter as it would in managing its own commercial agreements.
 13. A CASS debt management firm should ensure that each client bank account acknowledgement letter is legible (e.g. any handwritten details should be easy to read), produced on the firm's own letter-headed paper, dated and addressed to the correct legal entity (e.g. where the approved bank belongs to a group of companies).
 14. A CASS debt management firm should also ensure each client bank account acknowledgement letter includes all the required information (such as account names and numbers, the parties' full names, addresses and contact information, and each signatory's printed name and title).
 15. A CASS debt management firm should similarly ensure that no square brackets remain in the text of each client bank account acknowledgement letter (e.g. after having removed or included square bracketed text, as appropriate, or having replaced square bracketed and italicised text with the required information as indicated in the templates in CASS 11 Annex 1) and that each page of the letter is numbered.
 16. A CASS debt management firm should complete a client bank account acknowledgement letter so that no part of the letter can be easily altered (e.g. the letter should be signed in ink rather than pencil).
 17. In respect of the client bank account acknowledgement letter's governing law and choice of competent jurisdiction (see paragraphs (l) and (m) of the template client bank account acknowledgement letters), a CASS debt management firm should agree with the approved bank and reflect in the letter that the laws of a particular jurisdiction will govern the client bank account acknowledgement letter and that the courts of that same jurisdiction will have jurisdiction to settle any disputes arising out of, or in connection with, the client bank account acknowledgement letter, its subject matter or formation.
 18. If a CASS debt management firm does not, in any client bank account acknowledgement letter, utilise the governing law and choice of competent jurisdiction that is the same as either or both:
 (a) the laws of the jurisdiction under which either the firm or the relevant approved bank are organised; or
 (b) as is found in the underlying agreement/s (e.g. banking services agreement) with the relevant approved bank;

then the CASS debt management firm should consider whether it is at risk of breaching either CASS 11.8.4 R (3) or, if it is a CASS large debt management firm, CASS 11.7.2 R.


Authorised signatories
 19. A CASS debt management firm is required under CASS 11.8.7 R to use reasonable endeavours to ensure that any individual that has countersigned a client bank account acknowledgement letter returned to the firm was authorised to countersign the letter on behalf of the relevant approved bank.
 20. If an individual that has countersigned a client bank account acknowledgement letter does not provide the CASS debt management firm with sufficient evidence of his/her authority to do so then the CASS debt management firm is expected to make appropriate enquiries to satisfy itself of that individual's authority.
 21. Evidence of an individual's authority to countersign a client bank account acknowledgement letter may include a copy of the approved bank's list of authorised signatories, a duly executed power of attorney, use of a company seal or bank stamp, and/or material verifying the title or position of the individual countersigning the client bank account acknowledgement letter.
 22. A CASS debt management firm should ensure it obtains at least the same level of assurance over the authority of an individual to countersign the client bank account acknowledgement letter as the firm would seek when managing its own commercial arrangements.


Third party administrators
 23. If a CASS debt management firm uses a third party administrator (TPA) to carry out the administrative tasks of drafting, sending and processing a client bank account acknowledgement letter, the text "[Signed by [Name of Third Party Administrator] on behalf of [CASS debt management firm]]" should be inserted to confirm that the client bank account acknowledgement letter was signed by the TPA on behalf of the CASS debt management firm.
 24. In these circumstances, the CASS debt management firm should first provide the TPA with the requisite authority (such as a power of attorney) before the TPA will be able to sign the client bank account acknowledgement letter on the CASS debt management firm's behalf. A CASS debt management firm should also ensure that the client bank account acknowledgement letter continues to be drafted on letter-headed paper belonging to the CASS debt management firm.


Client bank accounts
 25. A CASS debt management firm must ensure that each of its client bank accounts follows the naming conventions prescribed in the Glossary. This includes ensuring that all client bank accounts include the term 'client' in their title or an appropriate abbreviation in circumstances where this is permitted by the Glossary definition.
 26. All references to the term "Client Bank Account[s]" in a client bank account acknowledgement letter should also be made consistently in either the singular or plural, as appropriate.

CASS 12.1 Application

CASS 12.1.1
01/07/2014
FCA
This chapter applies to a firm conducting business pursuant to the Part 30 exemption order.
CASS 12.1.2
01/07/2014
FCA
United States ('US') legislation restricts the ability of non-US firms to trade on behalf of customers resident in the US ('US customers') on non-US futures and options exchanges. The relevant US regulator (the CFTC) operates an exemption system for firms authorised under the Act. Under the Part 30 exemption order, eligible firms may apply for confirmation of exemptive relief from Part 30 of the General Regulations under the US Commodity Exchange Act. In line with this system, both the applicant firm and the FCA must make certain written representations to the CFTC.

CASS 12.2 Treatment of client money

CASS 12.2.1
01/10/2014
FCA
Under condition 2(g) of the Part 30 exemption order, a firm with exemptive relief represents to the CFTC that it consents to refuse to allow any US customer the option of not having its money treated as client money if it is held or received in respect of transactions on non-US exchanges, unless that US customer is an "eligible contract participant" as defined in section 1a(18)of the Commodity Exchange Act, 7 U.S.C.
CASS 12.2.2
01/07/2014
FCA
The FCA understands that in complying with condition 2(g) of the Part 30 exemption order, a firm is representing that it will not:
(1) make use of the opt-out arrangements in CASS 7.1.7C G to CASS 7.1.7G G; or
(2) conduct business to which the client money rules do not apply because of the exemption for CRD credit institutions and approved banks in CASS 7.1.8 R to CASS 7.1.11A R; or
(3) enter into any arrangement relating to the transfer of full ownership of the client's money to the firm for the purposes set out in CASS 7.2.3 R (1);
in relation to business conducted pursuant to the Part 30 exemption order.

LME bond arrangements

CASS 12.2.3
01/07/2014
FCA
For firms with exemptive relief under the Part 30 exemption order, the CFTC has issued certain no-action letters which, on the FCA's understanding, would allow such firms to use an LME bond arrangement as an alternative to complying with condition 2(g) of the Part 30 exemption order. Under an LME bond arrangement, a firm may arrange for a binding letter of credit to be issued to cover the 'secured amount' (as defined by section 30.7 of the General Regulations under the US Commodity Exchange Act). The letter of credit must be drawn up in a pre-specified format and may be issued for either:
(1) an omnibus account in favour of a specified trustee; or
(2) a specified client who is the named beneficiary.
CASS 12.2.4
01/07/2014
FCA
A firm must not reduce the amount of, or cancel a letter of credit issued under, an LME bond arrangement where this will cause the firm to be in breach of the conditions of the Part 30 exemption order.
CASS 12.2.5
01/07/2014
FCA
A firm must notify the FCA immediately if it arranges the issue of a letter of credit for a specified client who is the named beneficiary under an LME bond arrangement.
CASS 12.2.6
01/07/2014
FCA
A firm's use of an LME bond arrangement does not remove the need for the firm to act in accordance with the client money rules.

CASS TP 1 Transitional Provisions

CASS TP 1.1 

FCA
(1)(2) Material to which the transitional provision applies(3)(4) Transitional provision (5) Transitional provision: dates in force(6) Handbook provision: coming into force
-1CASS 1ARCASS 1A does not apply to an operator of an electronic system in relation to lending who holds an interim permission.From 1 April 2014 to 30 September 20141 April 2014
1CASS 2 to CASS 4R[deleted]
2Every rule in the HandbookRExpired
  GExpired  
2A G[deleted]  
3CASS 5.1 to CASS 5.6RApply in relation to money (and where appropriate designated investments) held by a firm on 14 January 2005 (being money or designated investments to which CASS 5.1 to CASS 5.6 would not otherwise apply) to the extent that such money (or designated investments) relate to business carried on before 14 January 2005 and which would, if conducted on or after 14 January 2005, be an insurance mediation activity.Indefinitely14 January 2005
4CASS 5.1.5A RR[Expired]
5CASS 5.3.2 RR[Expired]
6CASS 5.4.7 RR[Expired]
7CASS 5.5.65 RR[Expired]
8CASS 6.3.5 R[deleted]
8ACASS 6.3.5 R to CASS 6.3.8RRThe rules listed in column (2) do not apply in relation to agreements executed before 1 April 2012.1 April 2012 until 30 September 20121 April 2012
  GNotwithstanding the operation of CASS TP 1.1R(8A), a firm should as soon as reasonably practicable modify its agreement with that third party so as to meet the requirements of CASS 6.3.5 R to CASS 6.3.8 R.  
9CASS 6.1.6R (2) and CASS 6.1.6A R[deleted]
    
10CASS 7.2.3R (2) and CASS 7.2.3A R [deleted]
    
10ACASS 7.4.11AR (2)R(1) The rule in column (1) applies when a firm enters into a new contract with a bank to provide a client bank account.

(2) In relation to an arrangement under which a firm holds a client bank account with a bank that is in place as at the date in column (5), and as soon as it is permitted to do so under that arrangement, the firm must terminate any contract that does not comply with the rule in column (1) and enter into a new contract (in respect of which (1) shall apply). If necessary to comply with the rule in column (1), a firm must move client money into another client bank account under compliant terms.
Indefinitely1 July 2014
11CASS 7 and CASS 7ARThe rules listed in column (2) do not apply to an operator of an electronic system in relation to lending who holds an interim permission.From 1 April 2014 to 30 September 20141 April 2014
12CASS 7 and CASS 7AR(1) The rules in column (2) apply to an operator of an electronic system in relation to lending where the FCA or PRA has granted an application made by the firm for Part 4A permission and an interim permission the firm was treated as having has ceased to have effect.Indefinitely1 April 2014
   (2) The rules in column (2) apply in relation to money held by the firm on the date on which the written notice given by the FCA or PRA under section 55V(5) of the Act takes effect, to the extent that such money was received, or is held in the course of or in connection with the operation of an electronic system in relation to lending carried on before that date (or business carried on before 1 April 2014 and which would, if conducted on or after 1 April 2014, be money which was received, or held in the course of or in connection with the operation of an electronic system in relation to lending).  
13CASS 11R(1) CASS 11 does not apply to a CASS debt management firm which is a not-for-profit debt advice body treated as having Part 4A permission on and after 1 April 2014 by virtue of article 60 of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No.2) Order 2013 until 1 October 2014, if the firm acts in accordance with the provisions of paragraphs 3.42 and 3.43 of the Debt management (and credit repair services) guidance (OFT366rev) previously issued by the Office of Fair Trading, as they were in effect immediately before 1 April 2014.Indefinitely1 April 2014
(2) CASS 11 applies in relation to money held by a CASS debt management firm within (1) on 1 October 2014 to the extent that such money was received, or is held on behalf of an individual, in the course of or in connection with debt management activity carried on before that date (or business carried on before 1 April 2014 and which would, if conducted on or after 1 April 2014, be a debt management activity).
14CASS 11R(1) This rule applies to a CASS debt management firm where the FCA or PRA has granted an application made by the firm for Part 4A permission and an interim permission the firm was treated as having has ceased to have effect.Indefinitely1 April 2014
(2) CASS 11 applies in relation to money held by the CASS debt management firm on the date on which the written notice given by the FCA or PRA under section 55V(5) of the Act takes effect, to the extent that such money was received, or is held on behalf of an individual, in the course of or in connection with debt management activity carried on before that date (or business carried on before 1 April 2014 and which would, if conducted on or after 1 April 2014, be a debt management activity).

CASS Sch 1 Record keeping requirements

CASS Sch 1.1
01/12/2004
FCA

The aim of the guidance in the following table is to give the reader a quick overall view of the relevant record keeping requirements.

CASS Sch 1.2
01/12/2004
FCA

It is not a complete statement of those requirements and should not be relied on as if it were.

CASS Sch 1.3
01/07/2014
FCA

Handbook referenceSubject of recordContents of recordWhen record must be madeRetention period
CASS 1A.3.3 RAllocation of the CASS oversight responsibilities in CASS 1A.3.1 R, of the CASS operational oversight function, or of the responsibilities in CASS 1A.3.1C R (2), as relevantThe person to whom the CASS oversight responsibilities have been allocated, subject to the provisions of CASS 1A.3.3 R, to whom the CASS operational oversight function has been allocated in accordance with CASS 1A.3.1A R, or to whom the responsibilities in CASS 1A.3.1C R (2) have been allocatedUpon allocation5 years (from the date the record was made)
CASS 1.4.12 R and, where applicable, CASS 1.4.13 RFor a firm which carries on auction regulation bidding, election (under CASS 1.4.9 R) to comply with CASS in respect of this activity and, where applicable, decision to discontinue use of that opt inRecord of this election or, where applicable, the decision to discontinue use of the opt in, including the date on which either is to be effectiveUpon making the election or, where applicable, upon taking the decision to discontinue use of the opt in5 years from the date on which the opt in ceases to be used
 [deleted]
[deleted]
[deleted]
[deleted]
[deleted]
[deleted]
[deleted]
[deleted]
CASS 5.1.1 R (4)Record of election of compliance with specified CASS rulesRecord of compliance with specified CASS rulesNot specifiedNot specified
CASS 5.2.3 R (2)Holding client money as agentThe terms of the agreementNot specifiedSix years
CASS 5.4.4 R (2)Adequacy of systems and controlsWritten confirmation of adequate systems and controls from its auditorNot specifiedNot specified
CASS 5.5.84 RClient money calculationWhether the firm calculates its client money requirements according to CASS 5.5.84 R or CASS 5.5.84 RNot specifiedNot specified
CASS 5.5.84 RTransactions and commitments for client moneyExplanation of the firm's transactions and commitments for client moneyNot specifiedThree years
CASS 5.8.3 R (1)Client's title to a contract of insuranceIdentity of such documents and/or property and dates received and delivered to clientNot specifiedThree years
CASS 6.1.16CR (3)A personal investment firm that temporarily holds a client's designated investments which is not in the course of MiFID businessClient details and any actions taken by the firm 5 years (from the making of the record)
CASS 6.1.16K RClient custody assets which the firm has arranged for another to hold or receiveFull detailsOn receipt5 years
[deleted]
CASS 6.3.1R (4)Appropriateness of a firm's selection of a third party Grounds upon which a firm satisfies itself as to the appropriateness of the firm's selection of a third party to hold safe custody assets belonging to clientsDate of the selection5 years (from the date the firm ceases to use the third party to hold safe custody assets belonging to clients)
CASS 6.4.3 RDetails of clients and safe custody assets used for the firm's own account or the account of another client of the firmDetails of the client on whose instructions the use of the safe custody assets has been effected and the number of safe custody assets used belonging to each client Maintain up to date records5 years (from the date the record was made)
CASS 6.5.1 RSafe custody assets held for each client and the firm's own applicable assetsAll that is necessary to enable the firm to distinguish safe custody assets held for one client from safe custody assets held for any other client, and from the firm's own applicable assetsMaintain up to date records5 years (from the date the record was made)
CASS 6.5.2 RSafe custody assets held for clients Accurate records which ensure theircorrespondence to the safe custody assets held for clientsMaintain up to date records5 years (from the date the record was made)
CASS 6.5.2A RClient agreements that include a firm's right to use safe custody assets for its own accountA copy of every executed client agreement that includes a firm's right to use safe custody assets for its own accountMaintain up-to-date records5 years (from the date the record was made)
CASS 6.5.3 RDefault record keeping provision for CASS 6Refer to the rule concernedRefer to the rule concernedFive years from the later of:

(1) the date it was created; and

(2) if it has been modified since the date in (1), the date it was most recently modified
CASS 7.1.3R (2)Record of election to comply with the client money chapterRecord of election to comply with the client money chapter, including the date from which the election is to be effectiveDate of the election5 years (from the date the firm ceases to use the election)
CASS 7.1.15C RRecord of election in relation to CASS 7.1.15C RRecord of election in relation to CASS 7.1.15C RDate of electionNot specified (see default provision CASS 7.6.4 R)
CASS 7.1.15G RTrustee firm's election to comply, or to cease to comply, with specific CASS 7 provisionsRelevant provisions, date of election and of any decision to cease to complyWhen election made or decision taken to cease to comply5 years after ceasing to use the election
CASS 7.1.15J RTrustee firm's election to comply, or to cease to comply, with specific CASS 7 provisionsRelevant provisions, date of election and of any decision to cease to complyWhen election made or decision taken to cease to comply5 years after ceasing to use the election
CASS 7.4.10 RAppropriateness of a firm's selection of a third party Grounds upon which a firm satisfies itself as to the appropriateness of the firm's selection of a third party to hold client moneyDate of the selection5 years (from the firm ceases to use the third party to hold client money)
CASS 7.6.1 RClient money held for each client and the firm's own moneyAll that is necessary to enable the firm to distinguish client money held for one client from client money held for any other client, and from the firm's own moneyMaintain up to date recordsFive years (from the date the record was made)
CASS 7.6.2 RClient money held for each client Accurate records to ensure the correspondence between the records and accounts of the entitlement of each client for whom the firm holds client money with the records and accounts of the client money the firm holds in client bank accounts and client transaction accountsMaintain up to date recordsFive years (from the date the record was made)
CASS 7.6.4 RDefault record keeping provision for CASS 7Refer to the rule concernedRefer to the rule concernedFive years from the later of:

(1) the date it was created; and

(2) if it has been modified since the date in (1), the date it was most recently modified
CASS 7.6.7 RInternal reconciliation of client money balances Explanation of method of internal reconciliation of client money balances used by the firm, and if different from the standard method of internal client money reconciliation, an explanation as to how the method used affords equivalent degree of protection to clients, and how it enables the firm to comply with the client money distribution rulesDate the firm starts using the method5 years (from the date the firm ceases to use the method)
CASS 7.19.6 RFor each sub-pool established by the firmAll the client beneficiaries of that sub-poolFrom the date on which the sub-pool is createdFive years following the date on which client money was last held by the firm in relation to the sub-pool to which the record applied
CASS 7.19.7 RFor each sub-pool established by the firm(a) The name of the sub-pool

(b) The identity of the net margined omnibus account to which the sub-pool relates;

(c) Each client bank account and each client transaction account maintained for the sub-pool;

(d) the applicable sub-pool disclosure document for the sub-pool.
Prior to the date on which the firm intends to receive or hold client money for that sub-poolFive years following the date on which client money was last held by the firm in relation to the sub-pool to which the record applied
CASS 7.19.8 RFor each sub-pool established by the firmA list of all the sub-pools the firm has created.From the date on which the sub-pool is createdFive years following the date on which client money was last held by the firm in relation to the sub-pool to which the record applied
CASS 7.19.9 RFor each sub-pool established by the firmA sub-pool disclosure document At the time of establishing the relevant sub-pool5 years following the date on which client money was last held by the firm in relation to the sub-pool to which the sub-pool disclosure document applied
CASS 7.19.13R (2)For each sub-pool established by the firmThe name of each client bank account and each client transaction account maintained for the sub-pool, including a unique identifying reference From the date on which the client bank account and client transaction account is maintained for the sub-pool5 years following the date on which client money was last held by the firm in relation to the sub-pool to which the record applied
CASS 7A.3.8R (3)Client money shortfallEach client's entitlement to client money shortfall at the failed bankMaintain up to date recordsUntil client is repaid
CASS 7A.3.10R (3)Client money shortfallEach client's entitlement to client money shortfall at the failed bankMaintain up to date recordsUntil client is repaid
CASS 7A.3.11R (3)Client money shortfallEach client's entitlement to client money shortfall at the failed bankMaintain up to date records Until client is repaid
CASS 7A.3.17R (3)Client money shortfallEach client's entitlement to client money shortfall at the failed intermediate broker, settlement agent or OTC counterpartyMaintain up to date records Until client is repaid
CASS 8.3.1 RAdequate records and internal controls in respect of the firm's use of mandates (see CASS 8.3.2R (1) to CASS 8.3.2R (5) ) Up to date list of firm's mandates and any conditions regarding the use of mandates, all transactions entered into, details of procedures and internal controls for giving and receiving of instructions under mandates, and important client documents held by the firmMaintain current full detailsNot specified
CASS 10.1.3 RA firm's CASS resolution packThe documents to which CASS 10.2 and CASS 10.3 referFrom the date on which a firm becomes subject to CASS 10.1.3 RNone is specified
CASS 11.3.6 RAllocation of CASS oversight function in CASS 11.3.1 R or CASS 11.3.2 R, or CASS operational oversight function in CASS 11.3.4 RThe person to whom (as applicable) the CASS oversight responsibilities have been allocated, or to whom the CASS operational oversight function has been allocatedUpon allocation5 years (from the date the record was made)
CASS 11.7.6 RAppropriateness of a CASS large debt management firm's selection of an approved bankGrounds upon which a CASS large debt management firm satisfies itself as to the appropriateness of the firm's selection of an approved bank at which to hold client moneyDate of the selection5 years (from the date the firm ceases to use the approved bank to hold client money)
CASS 11.8.8 RClient bank account acknowledgement letters sent in accordance with CASS 11.8.2 REach countersigned client bank account acknowledgement letters receivedOn receipt of each letter5 years (following closure of the last client bank account to which the letter relates)
CASS 11.8.9 RDemonstration that a CASS debt management firm has complied with CASS 11.8.2 R to CASS 11.8.7 REvidence of such complianceOn compliance with the relevant provisionNone specified
CASS 11.9.5 RMoney received from clients in the form of cash, cheques or other payable ordersDetails of money receivedOn receiptNone specified
CASS 11.9.8 R (2)Unidentified client money under CASS 11.9.8 R (2)Details of unidentified client money heldBeing unable to identify money as client money or its own money, and deciding it is reasonably prudent to so record Until it performs the necessary steps to identify the money under CASS 11.9.8 R (1)
CASS 11.11.1 RClient money held for each client and the CASS debt management firm's own moneyAll that is necessary to enable the CASS debt management firm to distinguish client money held for one client from client money held for any other client, and from the firm's own moneyMaintain up-to-date recordsNone is specified
CASS 11.11.3 RClient money held for each client Accurate records to ensure the correspondence between the records and accounts of the entitlement of each client for whom the CASS debt management firm holds client money with the records and accounts of the client money the firm holds in client bank accounts Maintain up-to-date recordsNone is specified
CASS 11.11.4 RPayments made to, for or on behalf of clients by a CASS debt management firm and written and oral contact with clients and creditorsDetails of payments made and of the written or oral contactMaintain up-to-date recordsNone is specified
CASS 11.12.4 RA CASS debt management firm's CASS 11 resolution packThe documents to which CASS 11.12.3 R and CASS 11.12.4 R refer.From the date on which a CASS debt management firm becomes subject to CASS 11.12.3 RNone is specified
CASS 11.13.12 R (3)A CASS large debt management firm's record of each client's shortfall in the event of a secondary pooling eventDetails of the shortfallOn the secondary pooling event occurringNone is specified

CASS Sch 2 Notification requirements

CASS Sch 2.1
01/07/2014
FCA

Handbook referenceMatter to be notifiedContents of notificationTrigger eventTime allowed
CASS 1A.2.5 RElection to be treated as a CASS medium firm or a CASS large firmThe fact of that electionThe fact of that electionTo be made at least one week before the election is intended to take effect
CASS 1A.2.8 R (1) - (3)[deleted]
CASS 1A.2.8 R (4)[deleted]
CASS 1A.2.8A R[deleted]
CASS 1A.2.9 R (1) - (3)The highest total amount of client money and the highest total value of safe custody assets held by a firm, as more fully described in CASS 1A.2.9 RThe highest total amount of client money and safe custody assets held by a firm, as more fully described in CASS 1A.2.9 R.The need to comply with CASS 1A.2.9 R (1)- (3)By the fifteenth business day of January unless contrary provision is made in CASS 1A.2.9 R
CASS 1A.2.9 R (4)A firm's 'CASS firm type' classificationA firm's 'CASS firm type' classificationThe need to comply with CASS 1A.2.9 R (4)At the same time the firm makes the notification under CASS 1A.2.9 R (1), (2) or (3)
CASS 1A.3.2 R[deleted]
[deleted]
[deleted]
[deleted]
[deleted]
[deleted]
[deleted]
[deleted]
[deleted]
[deleted]
[deleted]
CASS 5.5.84 RFailure of bank, broker or settlement agentFull details including whether it intends to make good any shortfall that may have arisen in the amounts involvedAs soon as the firm becomes awareImmediately
CASS 5.5.84 RInability to perform the calculation required by CASS 5.5.84 RInability to perform the calculationInability to perform the calculationImmediately
CASS 5.5.84 RInability to make good any shortfall identified by CASS 5.5.84 RInability to make good any shortfall in client moneyInability to make good any shortfallImmediately
CASS 5.5.84 RInability to comply with the requirements in CASS 5.5.84 R; CASS 5.5.84 R; CASS 5.5.84 R; CASS 5.5.84 R; CASS 5.5.84 RInability to comply with the requirements of the rules listedInability to comply with the requirements of the rules listedAs soon as reasonably practicable
CASS 6.5.13R (1)Non-compliance or inability, in any material respect, to comply with the requirements in CASS 6.5.1 R (Records and accounts), CASS 6.5.2 R (Records and accounts, including internal reconciliations) or CASS 6.5.6 R (Reconciliations with external records) The fact that the firm has not complied or is unable, in any material respect, to comply with the requirements and the reasons for thatNon-compliance or inability, in any material respect, to comply with the requirementsWithout delay
CASS 6.5.13R (1A)Non-compliance or material inability to comply with the requirements inCASS 6.5.1 R (Records and accounts) and/or articles 89(1)(b) or 89(1)(c) (Safekeeping duties with regard to assets held in custody) of the AIFMD level 2 regulationThe fact that the firm has not complied or is materially unable to comply with the requirements and the reasons for thatNon-compliance or material inability to comply with the requirementWithout delay
CASS 6.5.13R (2)Non-compliance or inability, in any material respect, to comply with the requirements in CASS 6.5.10 R (Reconciliation discrepancies)The fact that the firm has not complied or is unable, in any material respect, to comply with the requirements and the reasons for thatNon-compliance or inability, in any material respect, to comply with the requirementsWithout delay
CASS 7.6.16R (1)Non-compliance or inability, in any material respect, to comply with the requirements in CASS 7.6.1R (Records and accounts), CASS 7.6.2R (Records and accounts, including internal reconciliations) or CASS 7.6.9R (Reconciliations with external records)The fact that the firm has not complied or is unable, in any material respect, to comply with the requirements and the reasons for thatNon-compliance or inability, in any material respect, to comply with the requirementsWithout delay
CASS 7.6.16R (2)Non-compliance or inability, in any material respect, to comply with the requirements in CASS 7.6.13R to CASS 7.6.15R (Reconciliation discrepancies)The fact that the firm has not complied or is unable, in any material respect, to comply with the requirements and the reasons for thatNon-compliance or inability, in any material respect, to comply with the requirementsWithout delay
CASS 7.19.21 RMaterial change to sub-poolFact of proposed change, risks and consequences to beneficiariesFirm determining that it wishes to make material change to a sub-poolNot less than two months before the date on which the firm intends the change to take effect
CASS 7.19.22 REstablishment of a sub-pool of client money to FCAFirm wishes to establish a sub-pool of client moneyFirm determining that it wishes to establish a sub-pool of client moneyNot less than two months before the date on which the firm intends to receive or hold client money for that sub-pool
CASS 7.19.24 RNon-compliance, or inability to comply with, with the requirements in CASS 7.19.11 R or CASS 7.19.18 RThe fact that the firm has not complied with, or is unable to comply with, the requirements of CASS 7.19.11 R or CASS 7.19.18 R (as applicable)Non-compliance with the applicable requirementWithout delay
CASS 7A.3.19R (1)Failure of a third party with which money is held - i.e.: bank, intermediate broker, settlement agent or OTC counterparty or other entity with which it has placed or to which it has passed client money Full detailsFirm becomes aware of the failure of the entityAs soon as the firm becomes aware
CASS 7A.3.19R (2)Failure of a third party with which money is held - i.e.: bank, intermediate broker, settlement agent or OTC counterparty or other entity with which it has placed or to which it has passed client money Intentions regarding making good any shortfall that has arisen or may arise, and of the amounts involvedFailure of third party with which client money is heldAs soon as reasonably practical
CASS 10.1.16 RIf a firm has not complied with, or is unable to comply with, CASS 10.1.3 RThe fact of that firm's non-compliance or inability to comply with the rule in CASS 10.1.3 RNon-compliance or inability to comply with CASS 10.1.3 RImmediately (as per CASS 10.1.16 R)
CASS 11.2.4 R (1) to CASS 11.2.4 R (3)The highest total amount of client money held in the previous year or projected to be held in the current year, as more fully described in CASS 11.2.4 RThe highest total amount of client money held in the previous year or projected to be held in the current year, as more fully described in CASS 11.2.4 RThe need to comply with CASS 11.2.4 R (1) to CASS 11.2.4 R (3)By the fifteenth day of January unless contrary provision is made in CASS 11.2.4 R (1) to CASS 11.2.4 R (4)
CASS 11.2.4 R (4)A firm's CASS debt management firm type classification A firm's CASS debt management firm type classificationThe need to comply with CASS 11.2.4 R (4)At the same time as the notification in CASS 11.2.4 R (1) to CASS 11.2.4 R (4)
CASS 11.11.30 R (1)Non-compliance with requirements in CASS 11.11.1 R to CASS 11.11.4 RNon-compliance with requirements in CASS 11.11.1 R to CASS 11.11.4 RThe non-complianceWithout delay
CASS 11.11.30 R (2)Amount of money segregated in client bank accounts is materially different from total aggregate of client money required to be segregated The fact that there is a material differenceAwareness of the differenceWithout delay
CASS 11.11.31 RA CASS large debt management firm's inability or failure to comply with CASS 11.11.23 R, CASS 11.11.28 R, CASS 11.11.13 R or CASS 11.11.25 RThe inability or failure to comply Awareness of the inability or failureWithout delay
CASS 11.12.7 RA CASS large debt management firm's inability or failure to comply with CASS 11.12.2 R or CASS 11.12.6 RThe inability or failure to comply Awareness of the inability or failureWithout delay
CASS 12.2.5 RLME bond arrangementsIssue of an individual letter of credit issued by the firmUpon issue of an individual letter of credit under an LME bond arrangementImmediately

CASS Sch 3 Fees and other required payments

CASS Sch 3.1
01/12/2004
FCA