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 custody chapter and the client money chapter apply in relation to regulated activities, conducted by firms, which fall within the definition of MiFID business and/or designated investment business.5

   555
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)

   [deleted]52

   5
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)

   [deleted]5

   2225
3. (3)

   The insurance client money chapter2 does not generally distinguish between different categories of client. However, the term consumer4is used for those to 4whom additional obligations are owed, rather than the term retail client.2 This is to be consistent with the client categories used in 1the Insurance: New Conduct of Business sourcebook4.

   2424
4. (4)

   Each provision in the custody chapter and the client money chapter makes it clear whether it applies to activities carried on for 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

   555

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 money that would otherwise be held under different chapters (see CASS 5.1.1 R (3) and CASS 7.1.3 R5).

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 custody chapter and the client money chapter apply in respect of any stock lending activity that is undertaken with or for a client3 by a firm. 1

   33333
2. (2)

   The collateral rules apply, where relevant, in respect of stock lending activity.1

   3

1. (1)

   The custody chapter and the client money chapter apply in respect of corporate finance business that is undertaken by a firm.1

   3333
2. (2)

   The collateral rules apply, where relevant, in respect of corporate finance business.1

   3

1. (1)

   The custody chapter and the client money chapter apply in respect of oil market activity and other energy market activity that is undertaken by a firm.1

   3333
2. (2)

   The collateral rules apply, where relevant, in respect of energy market activity.1

   3

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

   11
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.

5 Firms acting as trustee or depositary of an AIF are reminded of the obligations in FUND 3.11 (Depositaries) and Chapter IV (Depositary) of the AIFMD level 2 regulation which apply in addition to those in CASS.

4The effect of CASS 1.4.10 R is that when a firm makes an election in accordance with CASS 1.4.9 R:

1. (1)

   a two-day emissions spot falls within the scope of each chapter in CASS (save for CASS 5), for example:

   1. (a)

      the reference in CASS 6.1.1 R (1)(b) to safeguarding and administering investments is modified to include the activity of safeguarding and administering a two-day emissions spot; and

   2. (b)

      any money that the firm receives or holds for or on behalf of a client in the course of or in connection with its auction regulation bidding activities will be treated as client money and so will need to be dealt with in accordance with the client money rules; and

2. (2)

   that election also has effect in relation to rules and guidance elsewhere in the Handbook, including:

   1. (a)

      COBS 3 (Client categorisation);

   2. (b)

      COBS 6.1.7 R (Information concerning safeguarding of designated investments belonging to clients and client money);

   3. (c)

      COBS 6.1.11 R (Timing of disclosure);

   4. (d)

      COBS 16.4 (Statements of client designated investments or client money);

   5. (e)

      SUP 3 (Auditors);

   6. (f)

      SUP 10A.4.4 R (the table of controlled functions) and SUP 10A.7.9 R (CASS operational oversight function (CF10a)); and

   7. (g)

      SUP 16.14 (Client money and asset return).

4The option to elect to comply with CASS set out in CASS 1.4.9 R only applies to the extent the firm is carrying on auction regulation bidding. Where a firm is carrying on MiFID business bidding, CASS applies to it in accordance with the general application rules in CASS for a firm that is carrying on MiFID business.

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.