Browse menu cass 7 client money rules practical law primary source 95281260 approx. In the world of compliance advisory, cass rules standing for client money and assets sourcebook govern how investment firms protect their clients money and assets. Where a company holds client money in connection with a mifid or other investment business it is required to apply the rules set out in cass 7. The fcas new rules on the protection of client assets and money for investment firms ps149 came fuly into force on 1st june 2015. Since the fca took on the role of city watchdog, they have paid particular attention to revamping the client money rules, with the final shakeup to the client assets protection regime being introduced for firms back in june most firms will be well aware that failure to comply with the regulators client assets sourcebook.
Illuminating client money rules bovill briefing on fca cass. Fca releases update on changes to client money rules for. Cass county local court rules updated effective january 1, 2019 table of contents lr09cr2. Insurance intermediaries must take care with cass rpc. Examples of cass records held by a ta could include. Illuminating client money rules bovill briefing on fca. Cass has many recordkeeping requirements listed throughout. Jul 08, 2014 illuminating client money rules client money and assets policy statement 149 july 2014 ben blackettord 2. Is the client receiving the daily reports mandated by fsa rules and guidance at part 9 of the cass sourcebook value and location of safe custody assets, total and location of client money, marktomarket close. Clients should be able to understand a firms rules and procedures for handling client money. Where a firm establishes one or more subpools, the provisions of cass 7. Publishing written client money handling procedures is a statutory requirement for property agents and a requirement of the rics client money protection scheme for all other firms. The first thing to note is this covers money and financial instruments belonging to the client see cass 6. It is rare that the identity of agent banks with which funds are held is disclosed to clients and what the potential credit exposure therefore is.
This is to keep client money and assets safe if firms fail and exit the market. An authorised fund manager will not be in breach of the requirement under cass 7. Cass helps ensure the safety of client money and assets if a firm fails and leaves the market. Where a company holds client money in connection with a mifid or other. A firm may optout of applying these rules where they hold this money on behalf of professional clients. Firms must read the professional statement on client money handling and take steps to ensure that they comply with the requirements.
View on westlaw or start a free trial today, cass 7 client money rules, primarysources. Under the cass rules, client money must be diversified across a number of agent banks, so that a maximum of 20% of a firms client money can be held intragroup or with group related entities. The following is a brief summary of what is expected under cass 7, though of course it is recommended that anyone who is affected by these rules read them in full. Find out how to follow our client assets rules, including sending us a return about your client assets. Jul, 2011 client money is money which, in the course of carrying on insurance mediation activity, a firm holds on behalf of a client defined as a customer in the fsa glossary or which a firm treats as client money in accordance with the client money rules cass 5. If a firm receives money that would be client money were it not for the dvp window, if it has not passed that money onto a trusteedepository by the following day then it must be treated as client money within the cass rules.
The purpose of the rules is to facilitate the return of client money and safe custody assets more quickly than is currently the case. The fcas new rules on the protection of client assets and money for investment firms ps149 came fuly into force on 1 st june 2015. Near apple, lemon, 2, false means to find documents having apple within 2 words apart from lemon. So these firms must notify us of their client money andor safe.
The effect of the alternative approach to client money segregation, permitted by the cass 7 rules, whereby client money is both received from and paid out to clients from a firms general bank accounts, with internal reconciliations being conducted every business day. Client money is money which, in the course of carrying on insurance mediation activity, a firm holds on behalf of a client defined as a customer in the fsa glossary or which a firm treats as client money in accordance with the client money rules cass 5. Financial conduct authority fca client assets sourcebook. The move has come following feedback received on the original proposals, reconsideration of their costs and benefits as a result of the new requirements under the financial services act 2012. The new rules are a significant change to the previous regime and include a complete rewrite of the client money rules in cass 7 and major changes to the custody rules in cass 6. The financial conduct authority fca has today written to firms providing an update on consultation paper 1220. If, at the time of a primary pooling event, a firm has retained money in a client bank account for the purposes of alternative approach mandatory prudent segregation under cass 7. Designed to provide overseers of client money, compliance officers and individuals engaged in client money and assets administration with the technical knowledge necessary to succeed in this evolving area. Cass 7 client bank accounts diversification due diligence 1 june 2015 cass 7 money held by third parties client money held by third parties client money relating to custody assets of custodians 1 dec 2014 1 june 2015 cass 7 other issues interest money ceasing to be client money.
This is because these firms can hold any monies arising from investment business carried out for their clients as either client money as defined by cass 7 or a banking deposit in the latter case the client money rules cass 7 will have a reduced application. Where a primary pooling event has occurred, in theory. Last june 2014 the fca published a policy statement for investment firms holding client money and client assets. The fcas client assets sourcebook cass provides rules for firms to follow whenever the firm holds or controls client money or safe custody assets. This would mean transferring it immediately to a client money bank account. The rules consider the impact on the client money held by a firm in the event that the company a primary pooling event or a third party such as the bank that holds the client account a secondary pooling event goes into liquidation. The extensive and detailed changes included a rewrite of the fcas client money rules and substantial amendments to the cass sourcebook. Fca takes tough stance on cass breaches lexisnexis blogs. The new rules are a significant change to the previous regime and include a complete rewrite of the client money rules in cass. Reducing collateral risks in the financial crisis some. Firms holding client money as defined by cass 7 andor safe custody assets as defined by cass 6 from investment business are required, once a year, to determine their cass classification.
There must be some kind of agency or trust arrangement here. The cisi are promoters of integrity and ethics in the financial services profession. Cass 7by practical law financial servicesrelated contentplease note that this document has a law stated date, which means that it is no longer maintained. Aug 12, 2014 the purpose of the rules is to facilitate the return of client money and safe custody assets more quickly than is currently the case. Specific exemptions are available to firms for treatment of client money. You are holding the money for that client as banker and not as a trustee under the client money rules. This is a transliteration, verbatim, of the old cass 7. If you intend to use the banking exemption, you must first tell your client that. The banking exemption cass provision the jolly contrarian. The aberdeen fine is an example of this tough approach for client money breaches and of the higher penalties that the fca now imposes for these type of breaches. Illuminating client money rules client money and assets policy statement 149 july 2014 ben blackettord 2.
Cass managing client money and assets course description due to the current situation we offer now an online live edition of this programme consisting of 2 sessions of 3. To date the fsa has circulated a questionnaire to certain intermediaries for comment. Complete a client money health check compound growth. The segregation of client money from a firms own money is an important safeguard for its protection. Management of client money under cass 7 rules the challenges the client assets sourcebook cass rules implemented by the financial conduct authority fca introduced a wide range of oversight controls governing the way in which member firms have to manage client money accounts. Client money has been a key focus for the fca since the collapse of lehmans and it is taking an almost zero tolerance approach to any failings in client asset sourcebook cass procedures. Review of the client money rules for insurance intermediaries, where it had proposed some changes to the rules and guidance in chapter 5 of the market regulators client assets sourcebook cass. If a firm follows this process, the money will cease to be client money see cass 7. The effect of the alternative approach to client money segregation, permitted by the cass 7 rules, whereby client money is both received from and paid out to clients from a firms general bank accounts, with internal reconciliations being conducted every business day to establish what money needs to be transferred. Cass 7 client money physical receipts rules coming into force 1 june 2015 clarification that when a firm operating the normal approach physically receives client money in the form of cash, cheque or other payable order, it must record the receipt of money in the firms books and records. Reflecting client transaction accounts in the internal. What reporting procedures are in place so that client can check the extent of rehypothecation. The dvp exemption allows a firm a waiver from the full rigours of the cass safe custody and client money rules for money or assets delivered to the firm when settling a delivery versus payment transaction for securities.
Some cassregulated firms have struggled to comply with the rules in practice, and in recent years the financial conduct authority fca has levied substantial fines for cass. If you want to match the order of words, specify near apple, lemon, 2, true a percent sign % can be used to match zero or more characters. Cass 7 client money rules autorek will provide a fully auditable, transparent and actionable solution representing a well governed endtoend client money reconciliation and reporting process. The banking exemption theres no such thing as an absolute.
Insurance mediation by carrying on any regulated activities in relation to insurance, e. I have spoken to a lot of firms that are comfortable that they dont have client money because they apply the banking exemption. The fca has abandoned plans to push forward with the longawaited changes to its client money cass 5 rules for insurance brokers. Learning materials chartered institute for securities. Having been in force since october 2012, most uk firms holding client assets are very familiar with the cass rp requirements. A firm that adopts the alternative approach to segregating client money see cass 7. Additionally, for cass 7 client money rules, there is a brief summary of its implications here. Since the consultation was published, the fca has been working with the industry. It is the regulated firms responsibility to comply with the client money rules and ensure that they receive all. If you fail, the client money distribution and transfer rules will not apply to credit balances and so the. If you intend to use the banking exemption, you must first tell your client that you are holding the money for that client as banker and not as a trustee under the client money rules.
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