CASS 7.1 Application and Purpose

CASS 7.2 (Definition of client money) sets out the circumstances in which money is considered client money for the purposes of this chapter.

The opt-in to the client money rules in2this chapter 2does not apply in respect of money that a firm holds outside of the scope of the non-directive client money chapter or the insurance client money chapter, such as money falling within the scope of the opt-out for 2non-IMD designated investment business2 (see CASS 4.1.11 R).

1. (2)

   relevant cash deposit ISA wrapper;

If a firm has opted to comply with this chapter, the non-directive client money chapter or the insurance client money chapter will have no application to the activities to which the election applies.

A firm (other than a third country investment firm)2 that is only subject to the non-directive client money chapter or the insurance client money chapter may not opt to comply with this chapter.

If a firm that has agreed with an insurance undertaking under the client money rules in the insurance client money chapter to treat the undertaking's money as client money, opts in to this chapter in accordance with this section, the insurance undertaking's interest under the trust (or in Scotland agency) will be subordinated to the interests of the firm's other clients.

2The information requirements concerning the safeguarding of client money (see COBS 6.1.7 R) apply to a firm that has elected to comply with this chapter with respect of all client money to which the election applies.

If a credit institution that holds money as a deposit with itself is subject to the requirement to disclose information before providing services, it should, in compliance with that obligation, notify the client that:

1. (1)

   money held for that client in an account with the credit institution will be held by the firm as banker and not as trustee (or in Scotland as agent); and

2. (2)

   as a result, the money will not be held in accordance with the client money rules.

Pursuant to Principle 10 (Clients' assets), a credit institution that holds money as a deposit with itself should be able to account to all of its clients for amounts held on their behalf at all times. A bank account opened with the firm that is in the name of the client would generally be sufficient. When money from clients deposited with the firm is held in a pooled account, this account should be clearly identified as an account for clients. The firm should also be able to demonstrate that an amount owed to a specific client that is held within the pool can be reconciled with a record showing that individual's client balance and is, therefore, identifiable at any time. Similarly, where that money is reflected only in a firm's bank account with other banks (nostro accounts), the firm should be able to reconcile amounts owed to that client within a reasonable period of time.

1. (1)

   it should be able to account to all of its clients sums held for them at all times; and

2. (2)

   that money should, pursuant to Principle 10, be allocated to the relevant client promptly. This should be done no later than ten business days after the firm has received the money.

A credit institution is reminded that the exemption for deposits is not an absolute exemption from the client money rules.

A firm that holds money on behalf of, or receives money from, an affiliated company in respect of MiFID business must treat the affiliated company as any other client of the firm for the purposes of this chapter.

A firm that holds client money on behalf of, or receives money from, an affiliated company in respect of its non-MiFID business and opts under CASS 7.1.3 R (1) to comply with this chapter in with respect of that non-MiFID business, should refer to the non-directive client money chapter (see CASS 4.1.18 R (Affiliated companies)) to determine whether that money falls within the scope of the non-directive client money chapter and therefore within the scope of the opt-in.

1. (1)

   Principle 10 (Clients' assets) requires a firm to arrange adequate protection for clients' assets when the firm is responsible for them. An essential part of that protection is the proper accounting and treatment of client money. The client money rules provide requirements for firms that receive or hold client money, in whatever form.

2. (2)

   The client money rules also, implement the provisions of MiFID which regulate the obligations of a firm when it holds client money.