CASS 13.10 Records, accounts and reconciliations

1. (1)

   1A firm must keep such records and accounts as are necessary to enable it, at any time and without delay, to distinguish client money held for one customer from client money held for any other customer, and from its own money.

2. (2)

   A firm must allocate in its books and records any client money it receives to an individual customer promptly and, in any case, no later than two business days following the receipt.

3. (3)

   Pending a firm’s allocation of a receipt of client money to an individual customer under (2), it must record the received client money in its books and records as “unallocated client money”.

1A firm must maintain its records and accounts in a way that ensures their accuracy and, in particular, their correspondence to the client money held for individual customers.

1A firm must maintain up-to-date records that detail all payments received for, or on behalf of, customers and all payments to, from, or made on behalf of, customers.

1A firm must carry out an internal client money reconciliation each business day.

1An internal client money reconciliation requires a firm to check whether its client money resource, as determined by CASS 13.10.8R, on the previous business day, was at least equal to the client money requirement, as determined by CASS 13.10.9R, as at the close of business on that day.

1In carrying out an internal client money reconciliation, a firm must use the values contained in its internal records and ledgers (for example, its cash book or other internal accounting records), rather than the values contained in the records it has obtained from approved banks with whom it has deposited client money (for example, bank statements).

1The client money resource for client money held in accordance with CASS 13.10.6R is the aggregate of the balances on the firm’s client bank accounts, as at the close of business on the previous business day.

1. (1)

   1The client money requirement is the sum of:

   1. (a)

      the aggregate of all individual customer balances calculated in accordance with CASS 13.10.13R and CASS 13.10.14R;

   2. (b)

      the amount of any unallocated client money under CASS 13.10.1R(3);

   3. (c)

      the amount of any unidentified client money under CASS 13.6.6R(2)R; and

   4. (d)

      any other amounts of client money included in the calculation under (2).

2. (2)

   For the purposes of (1)(d), the firm must consider whether there are amounts of client money, other than those in (1)(a) to (c), to which the requirement to segregate applies and that it is appropriate to include in the calculation of its client money requirement and, if so, adjust the calculation accordingly.

1The individual customer balance for each client must be calculated as follows:

1. (1)

   the amount received for or on behalf of the customer by the firm; plus

2. (2)

   the amount of any interest, and any other sums, due from the firm to the customer; less:

3. (3)

   the aggregate of the amount of money:

   1. (a)

      paid to that customer by the firm; and

   2. (b)

      due and payable by the customer to the firm; and

   3. (c)

      due by the customer to a third party in accordance with the contractual arrangements in place between the firm and the customer.

1Where the individual customer balance calculated in respect of an individual client under CASS 13.10.13R is a negative figure (because the amounts received for or on behalf of, or due, to a client under CASS 13.10.13R(1) and CASS 13.10.13R(2) are less than the amounts paid by, or due and payable by, that customer under CASS 13.10.13R(3), that individual customer balance should be treated as zero for the purposes of the calculation of the firm’s client money requirement in CASS 13.10.9R.

1When an internal client money reconciliation reveals a difference between the client money resource and its client money requirement a firm must:

1. (1)

   identify the reason for the difference;

2. (2)

   ensure that any shortfall in the amount of the client money resource as compared to the amount of the client money requirement is made up by a payment into the firm’s client bank accounts by the end of the business day following the day on which the difference was discovered; and

3. (3)

   ensure that any excess in the amount of the client money resource as compared to the amount of the client money requirement is withdrawn from the firm’s client bank accounts by the end of the business day following the day on which the difference was discovered.

1A firm must perform an external client money reconciliation:

1. (1)

   each business day; and

2. (2)

   as soon as reasonably practicable after the relevant internal client money reconciliation;

to ensure the accuracy of its internal accounts and records by comparing its internal accounts records against those of approved banks with whom client money is deposited.

1When any discrepancy is revealed by an external client money reconciliation, a firm must identify the reason for the discrepancy and correct it as soon as possible, unless the discrepancy arises solely as a result of timing differences between the accounting system of the party providing the statement or confirmation and that of the firm.

1While a firm is unable to resolve a discrepancy arising from an external client money reconciliation, and one record or a set of records examined by the firm during the reconciliation process indicates that there is a need to have greater amount of client money than is in fact the case, the firm must assume, until the matter is finally resolved, that the record or set of records is accurate and pay its own money into a relevant client bank account.

1A firm must inform the FCA in writing without delay if:

1. (1)

   its internal records and accounts of client money are materially out of date or materially inaccurate so that the firm is no longer able to comply with the requirements in CASS 13.10.1R to CASS 13.10.4R; or

2. (2)

   it will be unable to or materially fails to conduct an internal client money reconciliation in compliance with CASS 13.10.5R; or

3. (3)

   after having carried out an internal client money reconciliation in accordance with CASS 13.10.5R it will be unable to, or materially fails to, pay any shortfall into (or withdraw any excess from) a client bank account so that the firm is unable to comply with CASS 13.10.15R; or

4. (4)

   it will be unable to or materially fails to conduct an external client money reconciliation in compliance with CASS 13.10.17R; or

5. (5)

   after having carried out an external client money reconciliation in accordance with CASS 13.10.17R it will be unable to, or materially fails to, identify the reason for any discrepancies and correct them in accordance with CASS 13.10.19R; or

6. (6)

   it becomes aware that, at any time in the preceding 12 months, the amount of client money segregated in its client bank accounts materially differed from the total aggregate amount of client money the firm was required to segregate in client bank accounts in accordance with the segregation requirements in CASS 13.6.