Reset to Today

To access the FCA Handbook Archive choose a date between 1 January 2001 and 31 December 2004.

Content Options:

Add to favourites

View Options:

More Resources:

External link Handbook Publications

Alternative versions

  1. Point in time
    2009-03-28

CASS 5.3 Statutory trust

CASS 5.3.1GRP

Section 139(1) of the Act (Miscellaneous ancillary matters) provides that rules may make provision which results in client money being held by a firm on trust (England and Wales and Northern Ireland) or as agent (Scotland only). CASS 5.3.2 R creates a fiduciary relationship between the firm and its client under which client money is in the legal ownership of the firm but remains in the beneficial ownership of the client. In the event of failure of the firm, costs relating to the distribution of client money may have to be borne by the trust.

CASS 5.3.2RRP

A firm (other than a firm acting in accordance with CASS 5.4) receives and holds client money as trustee (or in Scotland as agent) on the following terms:

  1. (1)

    for the purposes of and on the terms of CASS 5.3, CASS 5.5 and the client money (insurance) distribution rules;

  2. (2)

    subject to (4),1 for the clients (other than clients which are insurance undertakings when acting as such)1 for whom that money is held, according to their respective interests in it;

  3. (3)

    after all valid claims in (2) have been met, for clients which are insurance undertakings according to their respective interests in it;1

  4. (4)

    on the 1failure of the firm, for the payment of the costs properly attributable to the distribution of the client money in accordance with (2) and (3)1; and

  5. (5)

    after all valid claims and costs under (2) to (4) 1have been met, for the firm itself.

CASS 5.3.3GRP
  1. (1)

    A firm which holds client money can discharge its obligation to ensure adequate protection for its clients in respect of such money by complying with CASS 5.3 which provides for such money to be held by the firm on the terms of a trust imposed by the rules.

  2. (2)

    The trust imposed by CASS 5.3 is limited to a trust in respect of client money which a firm receives and holds. The consequential and supplementary requirements in CASS 5.5 are designed to secure the proper segregation and maintenance of adequate client money balances. In particular, CASS 5.5 does not permit a firm to use client money balances to provide credit for clients (or potential clients) such that, for example, their premium obligations may be met in advance of the premium being remitted to the firm. A firm wishing to provide credit for clients may however do so out of its own funds.