CASS applies to a firm as specified in the remainder of this chapter.

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.

The rules in CASS 1.2 set out the maximum scope of this sourcebook. The application of CASS is modified for certain activities by CASS 1.4. Also particular chapters or sections of CASS may have provisions which limit their application.

1. (1)

   The approach in CASS is to ensure that the rules in a chapter are applied to firms in respect of particular regulated activities or unregulated activities.

2. (2)

   The scope of the regulated activities to which CASS applies is determined by the description of the activity as it is set out in the Regulated Activities Order. Accordingly, a firm will not generally be subject to CASS in relation to any aspect of its business activities which fall within an exclusion found in the Regulated Activities Order. The definition of designated investment business includes, however, activities within the exclusion from dealing in investments as principal in article 15 of the Regulated Activities Order (Absence of holding out etc).

3. (3)

   The non-directive custody chapter and the non-directive client money chapter apply in relation to regulated activities, conducted by firms, which fall within the definition of designated investment business other than MiFID business.2

4. (3A)

   The collateral rules apply in relation to regulated activities, conducted by firms, which fall within the definition of designated investment business (including MiFID business).2

5. (4)

   The insurance client money chapter2 applies in relation to regulated activities, conducted by firms, which fall within the definition of insurance mediation activities.1

   2
6. (5)

   The MiFID custody chapter and the MiFID client money chapter apply in relation to regulated activities, conducted by firms, which fall within the definition of:2

   1. (a)

      MiFID business; and2

   2. (b)

      designated investment business other than MiFID business, where the firm has, in accordance with those rules, opted to comply with the provisions of those rules with respect of this business.2

7. (6)

   The mandate rules apply in relation to regulated activities, conducted by firms, which fall within the definition of designated investment business (including MiFID business) and insurance mediation activity, except where it relates to a reinsurance contract.2

1. (1)

   CASS applies directly in respect of activities conducted with or for all categories of clients.2

   2
2. (2)

   In CASS, except in the insurance client money chapter, MiFID custody chapter and MiFID client money chapter,2 the term customer refers to retail clients and professional clients, but not eligible counterparties.2 Where relevant, each of the provisions of CASS makes clear whether it applies to activities carried on with or for retail clients or professional clients,2 or both.

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3. (3)

   The insurance client money chapter2 does not generally distinguish between different categories of client. However, the term retail customer is used for those whom additional obligations are owed, rather than the term retail client.2 This is to be consistent with the client categories used in relation to the obligations in ICOB in relation to insurance mediation activities.1

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4. (4)

   Each provision in the MiFID custody chapter and the MiFID client money chapter makes it clear whether it applies to activities carried on orfor retail clients, professional clients or both. There is no further modification of the rules in these chapters in relation to activities carried on for eligible counterparties. Such clients are treated in the same way as other professional clients for the purposes of these rules.2

2The 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.

2A firm may opt to hold under a single chapter designated investments that would otherwise be held under different chapters (see CASS 6.1.7 G). A firm may also opt to hold under a single chapter money that would otherwise be held under different chapters (see CASS 4.1.1A R,CASS 5.1.1 R (3) and CASS 7.1.3R (1)).

The rules in CASS 1.3 set out the maximum territorial scope of this sourcebook. Particular rules may have express territorial limitations.

1. (1)

   The non-directive custody chapter and the non-directive client money chapter apply in respect of any stock lending activity that isnot MiFID business undertaken with or for a customer by a firm. If the stock lending activity involves MiFID business or if the firm has opted to comply with the MiFID custody chapter or the MiFID client money chapter with respect to its non-MiFID business, then the MiFID custody chapter and the MiFID client money chapter apply.1

2. (2)

   The collateral rules apply, where relevant, in respect of stock lending activity, whether or not the activity amounts to MiFID business

   1

1. (1)

   The non-directive custody chapter and the non-directive client money chapter apply in respect of corporate finance business that isnot MiFID business undertaken by a firm. If the corporate finance business involves MiFID business or if the firm has opted to comply with the MiFID custody chapter or the MiFID client money chapter with respect to its non-MiFID business, then the MiFID custody chapter and the MiFID client money chapter apply.1

2. (2)

   The collateral rules apply, where relevant, in respect of corporate finance business, whether or not the activity amounts to MiFID business.1

1. (1)

   The non-directive custody chapter and the non-directive client money chapter apply in respect of oil market activity and other energy market activity that isnot MiFID business undertaken by a firm. If the energy market activity (including oil market activity) involves MiFID business or if the firm has opted to comply with the MiFID custody chapter or the MiFID client money chapter with respect to its non-MiFID business, then the MiFID custody chapter and the MiFID client money chapter apply.1

2. (2)

   The collateral rules apply, where relevant, in respect of energy market activity, whether or not the activity amounts to MiFID business.1

1. (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's1appointed representative (when acting as such) will be treated as having been done or omitted by the firm (section 39(4) of the Act1). 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

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2. (2)

   Firms should also refer to SUP 12 (Appointed representatives), which sets out requirements which apply to firms using appointed representatives and tied agents2.

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.

For any electronic communication with a customer, a firm should:

1. (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. (2)

   be able to demonstrate that the customer wishes to communicate using this form of media; and

3. (3)

   if entering into an agreement, make it clear to the customer that a contractual relationship is created that has legal consequences.

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.