The client assets regime exists to support the FCA objectives and Principle 10 by requiring firms to adequately protect client assets when they are responsible for them.
This brought together specialist risk, supervision and policy functions and made various improvements to the client assets regime, such as:
- Enhancements to auditor reporting
- Reintroduction of the Client Money and Asset Return (CMAR)
- Creation of the Client Assets (CASS) operational oversight function (CF10a)
On 1 July 2014 the FCA updated the rules contained in the CASS section of its handbook. This took into account more recent firm failures and a comprehensive review of the client asset rules.
The new rules take into account the issues coming out of lessons learnt from these failures.
The rule changes affect all investment firms subject to CASS because they conduct investment business and hold client money, custody assets, collateral and/or mandates in relation to that investment business (or rely on an exemption contained within CASS).
Although the new rules that were introduced are wide ranging the changes will be introduced in three stages using a tiered approach with each stage increasing the regulatory burden on those firms affected.
The key dates are 1 July 2014, 1 December 2014 and 1 June 2015.
The FCA have announced that they are going to keep the client money distribution rules under review and intend to consult further on this later in 2014.
How Can Complyport help?
Complyport is able to assist FCA regulated investment firms and general insurance intermediaries that are subject to the rules contained in the CASS and reviews of the arrangements that they have in place in order to:
- Identify where client money or client assets might arise in their business and when it ceases to be so;
- Assess whether the firm adequately segregates client money and client assets;
- determine whether the firm is performing internal and external reconciliations with appropriate frequency;
- Establish whether the firm has the appropriate acknowledgement of trust status over its client money accounts;
- Keep abreast of rule changes in this area; understand the implications of the recent rule changes and how and when these will take effect under the FCA’s 3 stage tiered approach;
- Ensure that appropriate policies and procedures are in place;
- Prepare a CASS resolution pack under the rules;
- Assist with regulatory reporting such as the Client Money and Assets Return; and
- Provide training to and practical assistance to CF10a’s at firms.