CASS Resolution Packs and Client Money
Those of you involved in client money matters may find the post below interesting. The proposal arrived as little more than a footnote to the FSA’s August 2011 Consultation Paper CP11/16 on Recovery and Resolution Plans so has flown slightly under the radar.
CP11/16 includes an often over-looked proposal that all firms holding safe custody assets and/or client money (“CMA”) in relation to investment business, but excluding those firms that only hold client money for insurance intermediation purposes under CASS 5, will be required to create and maintain a CASS Resolution Pack containing the information and documentation detailed below.
The purpose of the proposal is to reduce the wider economic cost of firm failure by promoting the swifter return of CMA to clients. This would be achieved by ensuring that information and records that would help an insolvency practitioner or resolution authority return CMA to clients more quickly would be more readily accessible to the insolvency practitioner after the firm’s failure.
Contents of a CASS Resolution Pack
The documentation to be provided as part of a CASS Resolution Pack is categorised into two sections:
Section 1: consisting of new documents which are not currently required by existing FSA Handbook rules. In general, these are either signposting documents, which will direct an insolvency practitioner to the location of the firm’s CMA information and records, or alternatively documents providing important firm-specific and CMA information that would be helpful to an insolvency practitioner.
Section 2: consisting of documentation which is already required by existing FSA Handbook rules.
Each document required to be produced as part of a CASS Resolution Pack must be capable of being retrieved within 48 hours, irrespective of whether the firm is a going concern or has entered resolution.
Updating and Maintenance
Firms will be required to keep Section 1 items materially up-to-date. Any changes to Section 1 items must be reflected promptly, and in any event within 5 business days of the change. Section 2 items will be updated as per the existing FSA Handbook rules.
The individual with responsibility for CASS oversight of a firm will have responsibility for ensuring the firm’s compliance with the CASS Resolution Pack proposals. For CASS Large and CASS Medium firms, this will be the CF10a.
In addition, firms that are subject to the proposed CASS Resolution Pack rules, or that were subject to the rules in the previous year, must attest to the FSA, once every calendar year, that they were in compliance during the previous year, and that they are currently in compliance (if applicable). The individual with responsibility for CASS oversight will also be responsible for sending this attestation.
The FSA is due to publish a policy statement with respect to CASS Resolution Pack rule in Q1 2012, with a view to the rules themselves coming into effect six months later.
The estimated cost of producing a CASS Resolution Pack for a large, full service firm is estimated to be as high as GBP 5 million initially and GBP 2 million per annum thereafter. However, this appears to be a process which would lend itself to some of the cost-saving technology solutions currently being developed in the market around document storage and retention for RRP generally.
All the best