CASS 2.6 Operation1

CASS 2.6 applies in accordance with CASS 2.11

A firm must, as often as is necessary, but no less than every 25 business days, perform a reconciliation of its record of safe custody investments for which it is accountable but which it does not physically hold, with statements obtained from custodians, and in the case of dematerialised safe custody investments not held through a custodian, statements obtained from the person who maintains the record of legal entitlement.

If a firm is unable to obtain no less than every 25 business days, statements of clients' entitlement from unit trust manager, operators of ICVCs or administrators of offshore mutual funds, it need perform a reconciliation of the client's unit trusts, ICVCs and offshore mutual funds holdings only as often as the statements are received but no less than every 6 months.

A firm must, as often as is necessary, but no less than every 6 months (or twice in a period of 12 months but at least 5 months apart), carry out:

1. (1)

   a count of all safe custody investments it physically holds on behalf of clients and reconcile the result of that count with its record of safe custody investments that it physically holds on behalf of its clients; and

2. (2)

   a reconciliation between the firm's record of client holdings, and the firm's record of the location of safe custody investments.

A firm must perform the reconciliation in CASS 2.6.6 R as soon as reasonably practicable after the date to which the reconciliation relates.

The reconciliation referred to in CASS 2.6.6 R must cover all safe custody investments recorded in the firm's books and records and those of any nominee company which the firm uses for the provision of safe custody services and is controlled by the firm or by an affiliated company, and must be performed by:

1. (1)

   the 'total count method', which requires that all safe custody investments be counted and reconciled as at the same date; or

2. (2)

   an alternative reconciliation method (for example the rolling stock method) provided that:

   1. (a)

      all of a particular safe custody investment are counted and reconciled as at the same date;

   2. (b)

      all safe custody investments are counted and reconciled during a period of six months; and

   3. (c)

      written confirmation is given to the FSA from the firm's auditor that the firm has in place systems and controls which enable it to adequately perform the alternative method of reconciliation which the firm proposes to use.

A firm must promptly correct any discrepancies which are revealed, and make good, or provide the equivalent of, any unreconciled shortfall for which there are reasonable grounds for concluding that the firm is responsible.

A firm must inform the FSA in writing without delay:

1. (1)

   if it has not complied with, or is unable, in any material respect, to comply with the reconciliation requirements in CASS 2.6.2 R, CASS 2.6.4 R, CASS 2.6.6 R, CASS 2.6.8 R and CASS 2.6.10 R; or

2. (2)

   if having carried out a reconciliation it is unable, in any material respect, to comply with CASS 2.6.11 R.

A firm must ensure that proper records of the custody assets which it holds or receives, or arranges for another to hold or receive, on behalf of the client, are made and retained for a period of 3 years after they are made.

A firm that uses a safe custody investment in stock lending activity must ensure that its records identify which safe custody investments are available to be lent, and which have been lent.