CASS 11.4 Definition of client money and the discharge of fiduciary duty
CASS 11 provides important safeguards for the protection of client money held by CASS debt management firms that sit alongside the fiduciary duty owed by firms in relation to client money. CASS 11.4.2 R to CASS 11.4.4 G provide guidance and rules for when money ceases to be client money for the purposes of both those rules and of the fiduciary duty which CASS debt management firms owe to clients in relation to client money.
Money ceases to be client money if:
- (1)
it is paid to the client, or a duly authorised representative of the client; or
- (2)
it is:
- (3)
it is paid into an account of the client (not being an account which is also in the name of the firm) on the instruction, or with the specific consent, of the client;
- (4)
it is due and payable to the firm for its own account;
- (5)
it is paid to the firm as an excess in the client bank account (see CASS 11.11.12 R (2) and CASS 11.11.23 R (3)); or1
- (6)
it is transferred to a dormant asset fund operator under the applicable provisions of Part 1 of the Dormant Assets Act 2022 and in accordance with CASS 11.4.5R.1
When a CASS debt management firm draws a cheque or other payable order to discharge its fiduciary duty to the client, it must continue to treat the sum concerned as client money until the cheque or order is presented and paid.
1A payment of client money under section 21 of the Dormant Assets Act 2022 to a dormant asset fund operator that has Part 4A permission for dealing with unwanted asset money would amount to a payment to a third party with the instruction of the client for the purposes of CASS 11.4.2R(2)(a).
Transfers of client money to a dormant asset fund operator under Part 1 of the Dormant Assets Act 2022
1A firm may transfer a client money balance to a dormant asset fund operator under the applicable provisions of Part 1 of the Dormant Assets Act 2022. If it does so the transferred balance will cease to be client money under CASS 11.4.2R(6), provided that the firm can demonstrate it took reasonable steps to trace the client concerned and to return the balance prior to making such a transfer.
- (1)
1Taking reasonable steps in CASS 11.4.6R includes following this course of conduct:
- (a)
determining, as far as reasonably possible, the correct contact details for the relevant client;
- (b)
writing to the client at the last known address either by post or by electronic mail to inform it of the firm’s intention to no longer treat the client money balance as client money and to transfer the sums concerned to a dormant asset fund operator if the firm does not receive instructions from the client within 28 days (naming the specific relevant dormant asset fund operator);
- (c)
where the client has not responded after the 28 days referred to in (b), attempting to communicate the information set out in (b) to the client on at least one further occasion by any means other than that used in (b) including by post, electronic mail, telephone or media advertisement;
- (d)
subject to (e) and (f), where the client has not responded within 28 days following the most recent communication, writing again to the client at the last known address either by post or by electronic mail to inform them:
- (i)
that, as the firm did not receive a claim for the relevant client money balance, it will in 28 days transfer the balance to a dormant asset fund operator (naming the specific relevant dormant asset fund operator); and
- (ii)
of the steps that they must take to make a repayment claim;
- (i)
- (e)
if the firm has carried out the steps in (b) or (c) and in response has received positive confirmation in writing that the client is no longer at a particular address, the firm should not use that address for the purposes of (d);
- (f)
if, after carrying out the steps in (a), (b) and (c), the firm has obtained positive confirmation that none of the contact details it holds for the relevant client are accurate or, if utilised, the communication is unlikely to reach the client, the firm does not have to comply with (d); and
- (g)
waiting a further 28 days following the most recent communication under this rule before transferring the balance to the dormant asset fund operator.
- (a)
- (2)
Compliance with (1) may be relied on as tending to establish compliance with CASS 11.4.6R.
- (3)
Contravention of (1) may be relied on as tending to establish contravention of CASS 11.4.6R.
- (1)
1Unless the firm has failed and CASS 11.6.1R(3) applies, any costs associated with a firm ceasing to treat unclaimed client money balances as client money pursuant to CASS 11.4.5R should be paid for from the firm’s own funds.
- (2)
When transferring a client money balance to a dormant asset fund operator under the applicable provisions of Part 1 of the Dormant Assets Act 2022, a firm will need to consider its obligations under any contractual or other arrangements of the sort described at section 23 of the Dormant Assets Act 2022 in addition to meeting its obligations under the debt management client money rules and the debt management client money distribution rules.