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CASS 7.1 Application and Purpose

Application

CASS 7.1.1R

1This chapter (the client money rules) applies to 2 :

  1. (1)

    a MiFID investment firm:2

    1. (a)

      that holds client money; or2

    2. (b)

      that opts to comply with this chapter in accordance with CASS 7.1.3 R (1) (Opt-in to the MiFID client money rules); and2

  2. (2)

    a third country investment firm that opts to comply with this chapter in accordance with CASS 7.1.3 R (2) (Opt-in to the MiFID client money rules); 2

unless otherwise specified in this section.

CASS 7.1.2G

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

Opt-in to the MiFID client money rules

CASS 7.1.3R
  1. (1)

    A firm that receives or holds money in respect of which this chapter applies and money in respect of which the non-directive client money chapter or the insurance client money chapter applies, may elect to comply with the provisions of this chapter in respect of all such money and if it does so, this chapter applies as if all such money were money that the firm receives and holds in the course of, or in connection with, its MiFID business.

  2. (1A)

    A third country investment firm that receives or holds money from, for or on behalf of a client in the course of, or in connection with, its equivalent business of a third country investment firm may elect to comply with the provisions of this chapter in respect of the money it holds to which the non-directive client money chapter or the insurance client money chapter applies. If it does so, this chapter applies as if all such money were money that the firm receives and holds in the course of, or in connection with, MiFID business. 2

  3. (2)

    A firm must make and retain a written record of any election it makes under this rule, including the date from which the election is to be effective. The firm must make the record on the date it makes the election and must keep it for a period of five years after ceasing to use it.

CASS 7.1.4G

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;

CASS 7.1.5G

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.

CASS 7.1.6G

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.

CASS 7.1.7G

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.

CASS 7.1.7AG

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.

Credit institutions

CASS 7.1.8R

The client money rules do not apply to a BCD credit institution in relation to deposits within the meaning of the BCD held by that institution.

[Note: article 13(8) of MiFID and article 18(1) of the MiFID implementing Directive]

CASS 7.1.9G

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.

CASS 7.1.10G

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.

CASS 7.1.11G

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

Affiliated companies

CASS 7.1.12G

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.

CASS 7.1.13G

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.

Coins

CASS 7.1.14R

The client money rules do not apply with respect to coins held on behalf of a client if the firm and the client have agreed that the money (or money of that type) is to be held by the firm for the intrinsic value of the metal which constitutes the coin.

Solicitors

CASS 7.1.15R
  1. (1)

    An authorised professional firm regulated by the Law Society (of England and Wales), the Law Society of Scotland or the Law Society of Northern Ireland must comply with the MiFID client money (minimum implementing) rules and alsowiththe following rules of its designated professional body and, if it does so, it will be deemed to comply with the client money rules in this chapter.

  2. (2)

    The relevant rules are:

    1. (a)

      if the firm is regulated by the Law Society (of England and Wales):

      1. (i)

        the Solicitors' Accounts Rules 1998; or

      2. (ii)

        where applicable, the Solicitors Overseas Practice Rules 1990;

    2. (b)

      if the firm is regulated by the Law Society of Scotland, the Solicitors' (Scotland) Accounts, Accounts Certificate, Professional Practice and Guarantee Fund Rules 2001; and

    3. (c)

      if the firm is regulated by the Law Society of Northern Ireland, the Solicitors' Accounts Regulations 1998.

General purpose

CASS 7.1.16G
  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.