CASS 7.1 Application and Purpose

7This chapter applies to a firm that receives money from or holds money for, or on behalf of, a client in the course of, or in connection with, its:7

1. (1)

   MiFID business; and/or

2. (2)

   designated investment business; and/or8

3. (3)

   stocks and shares ISA business;8

unless otherwise specified in this section.

1. (1)

   A firm that receives or holds money to which this chapter applies in relation to: 3

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   1. (a)

      its MiFID business; or3

   2. (b)

      its MiFID business and its designated investment business which is not MiFID business; 3

   and holds money in respect of which CASS 5 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)

   [deleted]3

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3. (1B)

   A firm that receives or holds money to which this chapter applies solely in relation to its designated investment business which is not MiFID business and receives or holds money in respect of which 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 designated investment business.3

4. (1C)
   1. (a)

      A firm may elect to comply with all the provisions of this chapter for money that it receives or holds in respect of an ISA that only contains a cash deposit ISA.

   2. (b)

      Where a firm makes an election under (a), this chapter applies to it in the same way that it applies to a firm that receives and holds money in the course of or in connection with its MIFID business.8

5. (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.

6. (3)

   This rule is subject to CASS 1.2.11 R.7

Where a firm opts into this chapter under CASS 7.1.3 R (1C) it must notify clients for whom it holds the opted-in money that it is holding their money in accordance with the client money rules.

3CASS 7.1.7C G to CASS 7.1.7I G do not apply to a firm in relation to money held in connection with its MiFID business to which this chapter applies or in relation to money for which the firm has made an election under CASS 7.1.3 R (1).

3Subject to CASS 7.1.7F R, money is not client money when a firm (other than a sole trader) holds that money on behalf of, or receives it from, a professional client, other than in the course of insurance mediation activity, and the firm has obtained written acknowledgement from the professional client that:

1. (1)

   money will not be subject to the protections conferred by the client money rules;

2. (2)

   as a consequence, this money will not be segregated from the money of the firm in accordance with the client money rules and will be used by the firm in the course of its own business; and

3. (3)

   the professional client will rank only as a general creditor of the firm.

3Money is not client money if a firm, in respect of designated investment business which is not an investment service or activity, an ancillary service, a listed activity or insurance mediation activity:

1. (1)

   holds it on behalf of or receives it from a professional client who is not an authorised person; and

2. (2)

   has sent a separate written notice to the professional client stating the matters set out in CASS 7.1.7DR (1) to CASS 7.1.7DR (3).

3When a firm transfers client money to another person, the firm must not enter into an agreement under CASS 7.1.7D R or CASS 7.1.7F R with that other person in relation to that client money or represent to that other person that the money is not client money.

The client money rules do not apply to a CRD credit institution 6 in relation to deposits within the meaning of the CRD 6 held by that institution.

[Note: article 13(8) of MiFID and article 18(1) of the MiFID implementing Directive]7

1. (1)

   3This rule applies to a firm which is an approved bank but not a CRD credit institution.67

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2. (2)

   3The client money rules do not apply to money held by the approved bank if it is undertaking business which is not MiFID business but only when the money is held in an account with itself, in which case the firm must notify the client in writing that:

   1. (a)

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

   2. (b)

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

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3A firm that holds money on behalf of, or receives money from, an affiliated company in respect of designated investment business which is not MiFID business must not treat the money as client money unless:

1. (1)

   the firm has been notified by the affiliated company that the money belongs to a client of the affiliated company; or

2. (2)

   the affiliated company is a client dealt with at arm's length; or

3. (3)

   the affiliated company is a manager of an occupational pension scheme or is an overseas company; and

   1. (a)

      the money is given to the firm in order to carry on designated investment business for or on behalf of the clients of the affiliated company; and

   2. (b)

      the firm has been notified by the affiliated company that the money is to be treated as client money.

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.

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 that, with respect to its regulated activities, is subject to 5the following rules of its designated professional body, must comply with those rules and,5 where relevant paragraph (3), and3 if it does so, it will be deemed to comply with the client money rules.

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2. (2)

   The relevant rules are:

   1. (a)

      if the firm is regulated by the Law Society (of England and Wales), the SRA Accounts Rules 2011;7

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   2. (b)

      if the firm is regulated by the Law Society of Scotland, the Law Society of Scotland Practice Rules 20117; and

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   3. (c)

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

3. (3)

   If the firm in (1) is a MiFID investment firm that receives or holds money for, or on behalf of a client 7 7 in the course of, or in connection with its MiFID business, it must also comply with the MiFID client money (minimum implementing) rules in relation to that business.3

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3This chapter does not apply to the permitted activities of a long-term insurer or a friendly society, unless it is a MiFID investment firm that receives money from or holds money for or on behalf of a client in the course of, or in connection with, its MiFID business.

7Provided it complies with CASS 1.2.11 R, a firm that receives or holds client money in relation to contracts of insurance may elect to comply with the provisions of the insurance client money chapter, instead of this chapter, in respect of all such money.

3A firm must7 make and retain a written record of any election which it makes under CASS 7.1.15BA R 7 . 7

3A trustee firm which holds money in relation to its designated investment business which is not MiFID business to which this chapter applies, must hold any such client money separate from its own money at all times.

1. (1)

   7A trustee firm to which CASS 7.1.15F R applies may, in addition to the client money rules set out at CASS 7.1.15F R, also elect to comply with:

   1. (a)

      all the client money rules in CASS 7.4 (Segregation of client money);

   2. (b)

      CASS 7.5 (Transfer of client money to a third party);

   3. (c)

      all the client money rules in CASS 7.6 (Records, accounts and reconciliations); or

   4. (d)

      CASS 7.8 (Notification and acknowledgement of trust).

2. (2)

   A trustee firm must make 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.

3. (3)

   Where a trustee firm has made an election under (1) which it subsequently decides to cease to use, it must make a written record of this decision, including the date from which the decision is to be effective, and keep that record from the date the decision is made for a period of five years after the date it is to be effective.

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7A trustee firm to which CASS 7.1.15F R applies and which is otherwise subject to the client money rules must ensure that any client money it holds other than in its capacity as trustee firm is segregated from client money it holds as a trustee firm.7

1. (1)

   7A trustee firm to which CASS 7.1.15F R applies may elect that:

   1. (a)

      the applicable provisions of CASS 7.4 (Segregation of client money) and CASS 7.6 (Records, accounts and reconciliations) under CASS 7.1.15F R; and

   2. (b)

      and any further provisions it elects to comply with under CASS 7.1.15G R (1);

   will apply separately and concurrently for each distinct trust that the trustee firm acts for.

2. (2)

   A trustee firm must make 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.

3. (3)

   Where a trustee firm has made an election under (1) which it subsequently decides to cease to use, it must make a written record of this decision, including the date from which the decision is to be effective, and must keep that record from the date the decision is made for a period of five years after the date it is to be effective.

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