1. (1)

   1Subject to (2), (3) and (4)3, this2 chapter applies to a firm to which either or both of CASS 6 (Custody rules) and CASS 7 (Client money rules) applies.

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2. (2)

   In relation to a firm to which CASS 5 (Client money: insurance distribution6 activity) and CASS 7 (Client money rules) apply, this chapter does not apply in relation to client money that a firm holds in accordance with CASS 5.

3. (3)

   The rules and guidance in CASS 1A.2 apply to a firm even if at the date of the determination or, as the case may be, the notification, either or both of CASS 6 and CASS 7 do not apply to it, provided that:

   1. (a)

      either or both of those chapters applied to it during part or all of the previous calendar year; or

   2. (b)

      it projects that either or both will apply to it in the current calendar year.2

4. (4)

   This chapter does not apply to a firm to which only CASS 6 applies, applied or is projected to apply, merely because:43

   4
   1. (a)

      it is, was, or is projected to be a firm which arranges safeguarding and administration of assets; or4

   2. (b)

      when acting as a small AIFM and in relation to excluded custody activities, it would be, would have been or would be projected to be a firm which arranges safeguarding and administration of assets but for the exclusion in article 72AA of the RAO.4

5The rules and guidance in CASS 1A.2 (CASS firm classification) do not apply to a firm following its failure.

1. (1)

   A firm must once every year, and by the time it is required to make a notification in accordance with4CASS 1A.2.9R (4), determine whether it is a CASS large firm, CASS medium firm or a CASS small firm according to the amount of client money or safe custody assets which it holds, using the limits set out in the table in CASS 1A.2.7 R.

   4
2. (2)

   For the purpose of determining its ‘CASS firm type’ in accordance with CASS 1A.2.7 R, a firm must:

   1. (a)

      if it currently holds client money or safe custody assets, calculate the higher of the highest total amount of client money and the highest total value of safe custody assets held during the previous calendar year ending on 31 December and use that figure to determine its ‘CASS firm type’;

   2. (b)

      if it did not hold client money or safe custody assets in the previous calendar year but projects that it will do so in the current calendar year, calculate the higher of the highest total amount of client money and the highest total value of safe custody assets that it projects that it will hold during that year and use that figure to determine its ‘CASS firm type’; but

   3. (c)

      in either case, exclude from its calculation any client money held in accordance with CASS 5 (Client money: insurance distribution5 activity).

For the purpose of calculating the value of the total amounts of client money and safe custody assets that it holds on any given day during a calendar year a firm must:

1. (1)

   in complying with CASS 1A.2.2R (2)(a), base its calculation upon internal reconciliations performed during the previous year;

2. (2)

   in relation to client money or safe custody assets denominated in a currency other than sterling, translate the value of that money or that safe custody assets into sterling at the previous day’s closing spot exchange rate; and

3. (3)

   in relation to safe custody assets only, calculate their total value using the previous day’s closing mark to market valuation, or if in relation to a particular safe custody asset none is available, the most recent available valuation.

1. (1)

   Notwithstanding CASS 1A.2.2 R, provided that the conditions in (2) are satisfied a firm may elect to be treated:

   1. (a)

      as a CASS medium firm, in the case of a firm that is classed by the application of the limits in CASS 1A.2.7 R as a CASS small firm; and

   2. (b)

      as a CASS large firm, in the case of a firm that is classed by the application of the limits in CASS 1A.2.7 R as a CASS medium firm.

2. (2)

   The conditions to which (1) refers are that in either case:

   1. (a)

      the election is notified4 to the FCAin writing4;

      44
   2. (b)

      the notification in accordance with (a) is made4 at least one week before the election is intended to take effect; and

      4
   3. (c)

      the FCA has not objected.

Once every calendar year a firm must notify to the FCA in writing the information specified in (1), (2) or (3) as applicable, and the information specified in (4), in each case no later than the day specified in (1) to (4):4

1. (1)

   if it held client money or safe custody assets in the previous calendar year, the highest total amount of client money and the highest total value of safe custody assets held during the previous calendar year, notification of which must be made no later than the fifteenth business day of January; or4

   4
2. (2)

   if it did not hold client money or safe custody assets in the previous calendar year but at any point up to the fifteenth business day of January the firm projects that it will do so in the current calendar year, the highest total amount of client money and the highest total value of safe custody assets that the firm projects that it will hold during the current calendar year, notification of which must be made no later than the fifteenth business day of January4; or

   4
3. (3)

   in any other case, the highest total amount of client money and the highest total value of safe custody assets that the firm projects that it will hold during the remainder of the current calendar year, notification of which must be made no later than the business day before the firm begins to hold client money or safe custody assets4; and

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4. (4)

   in every case, of its ‘CASS firm type’ classification, notification of which must be made at the same time the firm makes the notification under (1), (2) or (3)4.

For the purpose of the annual notification to which CASS 1A.2.9 Rrefers4, a firm must apply the calculation rule in CASS 1A.2.3 R.

4A firm's 'CASS firm type' and any change to it takes effect:

1. (1)

   if the firm notifies the FCA in accordance with CASS 1A.2.9 R (1) or CASS 1A.2.9 R (2), on 1 February following the notification; or

2. (2)

   if the firm notifies the FCA in accordance with CASS 1A.2.9 R (3), on the day it begins to hold client money or safe custody assets; or

3. (3)

   if the firm makes an election under CASS 1A.2.5 R (1), and provided the conditions in CASS 1A.2.5 R (2) are satisfied, on the day the notification made under CASS 1A.2.5 R (2)(a) states that the election is intended to take effect.

1. (1)

   A CASS small firm must allocate to a single6director3 or senior manager3 of sufficient skill and authority6 responsibility for:3

   1. (a)

      oversight of the firm’s operational compliance with CASS; and3

   2. (b)

      reporting to the firm'sgoverning body in respect of that oversight.3

2. (2)

   A CASS small firm that is not a relevant authorised person must make the allocation in (1) to a director or senior manager who is approved to perform a significant influence function for that firm.3

[Note: article 7, first paragraph of the MiFID Delegated Directive]6

1A CASS medium firm and a CASS large firm must allocate to a single6director or senior manager of sufficient skill and authority6 the function of:

1. (1)

   oversight of the operational effectiveness of that firm’s systems and controls that are designed to achieve compliance with CASS;

2. (2)

   reporting to the firm’sgoverning body in respect of that oversight; and

3. (3)

   completing and submitting a CMAR to the FCA in accordance with SUP 16.14.

[Note: article 7, first paragraph of the MiFID Delegated Directive]6

2If, at the time a firm that is not a relevant authorised person3becomes a CASS medium firm or a CASS large firm in accordance with CASS 1A.2.12 R (1) or CASS 1A.2.12 R (2), the firm is not able to comply with CASS 1A.3.1A R because it has no director or senior manager who is an approved person in respect of the CASS operational oversight function, the firm must:

1. (1)

   take the necessary steps to ensure that it complies with CASS 1A.3.1A R as soon as practicable, which must at least include submitting an application for a candidate in respect of the CASS operational oversight function within 30 business days of the firm becoming a CASS medium firm or a CASS large firm; and

2. (2)

   until such time as it is able to comply with CASS 1A.3.1A R, allocate to a director performing a significant influence function or a senior manager performing a significant influence function responsibility for:

   1. (a)

      oversight of the firm's operational compliance with CASS;

   2. (b)

      reporting to the firm'sgoverning body in respect of that oversight; and

   3. (c)

      completing and submitting the CMAR to the FCA in accordance with SUP 16.14.

6Where a firm allocates the responsibilities in CASS 1A.3.1R or CASS 1A.3.1AR (“the CASS oversight responsibilities”) to a director or senior manager (“P”), the firm must not allocate any other responsibilities to P in addition to the CASS oversight responsibilities, unless the firm is satisfied on reasonable grounds that:

1. (1)

   P will still be able to discharge the CASS oversight responsibilities effectively; and

2. (2)

   the firm’s full compliance with CASS will not be compromised.

[Note: article 7, second paragraph of the MiFID Delegated Directive]

6A firm may allow the CASS oversight responsibilities to be shared amongst one or more directors or senior managers where this is done as part of a job share between those persons.

1. (1)

   Subject to (2), a firm must make and retain an appropriate record of the person to whom responsibility is allocated in accordance with CASS 1A.3.1 R, CASS 1A.3.1A R or CASS 1A.3.1C R (2)2.1

2. (2)

   A CASS small firm must make and retain such a record only where it allocates responsibility to a person other than the person in that firm who performs the compliance oversight function.

3. (3)

   A firm must ensure that the record made under this rule is retained for a period of five years after it is made.