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FCA CASS Review Leads to CASS RP Amendments

On 10 June 2014, following its original July 2013 consultation paper[1] the FCA published its long-awaited policy statement  and accompanying guidance note detailing changes to the client assets regime in the UK.

The policy statement represents a material rewrite of the CASS regime in the UK.  The most significant amendments are summarised here.  A number of consequential changes to the CASS RP rules flow out of the review as a result of which some new documentation will required to be exhibited within a firm’s CASS RP, and some existing documentation will no longer be required.  Some of the changes arise out of genuinely new requirements, such as those under which clearing members of EMIR-authorised or recognised central counterparties will be permitted to operate multiple discrete ‘pools’ of client money in relation to net margined omnibus client accounts[2] in order to support porting under EMIR, as well as the new requirement on firms to conduct periodic reviews of its selection and appointment of any third party with which it deposits safe custody assets and client money[3].  Other changes to the CASS RP rules are minor or more cosmetic in nature.  Fortunately for firms, most of the changes are not material, and the majority will not enter into force until 1 June 2015.  A summary of the changes is provided below.

To be included No longer required to be included
Records relating to any sub-pool, including the “sub-pool disclosure document” [4] Records sufficient to explain the method of internal reconciliation of client money balances[5]
Records relating to periodic reviews of the firm’s selection and appointment of any third party with which it deposits safe custody assets or client money[6] With respect to firms not using the ‘standard method of internal client money reconciliation’, written confirmation from the firm’s auditor that it has adequate systems and controls in place[7]
Physical asset reconciliations  
Policies and procedures for carrying out records checks and reconciliations[8]  

 

Key:

Takes effect on 1 July 2014 Takes effect on 1 June 2015

 

A number of other cosmetic documentation name changes take effect on 1 June 2015, as detailed below:

Old Term

New Term

“Trust Acknowledgement Letter” “Acknowledgement Letter”
“Internal reconciliations relating to safe custody assets” “Internal custody records checks”
“External reconciliations relating to safe custody assets” “External custody reconciliations”
“Internal reconciliations relating to client money” “Internal client money reconciliations”
“External reconciliations relating to client money” “External client money reconciliations”

 

 

[1] CP 13/5

[2] i.e. a single ‘pool’ in relation to each OCA

[3] Pursuant to CASS 6.3.2AR(2) (in the case of safe custody assets) and CASS 7.13.25R(3) (in the case of client money)

[4] Paragraph 4.27 and 4.28 (applies to clearing members only)

[5] Previously CASS 10.3.1R(8) referencing CASS 7.6.7R

[6] Pursuant to CASS 10.3.1R(1) and CASS 10.3.1R(6)

[7] Previously CASS 10.3.1R(8) referencing CASS 7.6.8R

[8] CASS 10.3.1R(5A)

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