CASS 7.13 1Segregation of client money

Where a firm establishes one or more sub-pools, the provisions of CASS 7.13 (Segregation of client money) shall be read as applying separately to the firm's general pool and each sub-pool in line with CASS 7.19.3 R and CASS 7.19.12 R.

A firm, on receiving any client money, must promptly place this money into one or more accounts opened with any of the following:

1. (1)

   a central bank;

2. (2)

   a CRD credit institution;

3. (3)

   a bank authorised in a third country6;

4. (4)

   a qualifying money market fund.

[Note: article 4(1) of the MiFID Delegated Directive6]

Unless otherwise permitted by any other rule in this chapter2, a firm using the normal approach must ensure that all client money it receives is paid directly into a client bank account at an institution referred to in CASS 7.13.3 R (1) to CASS 7.13.3 R (3), rather than being first received into the firm's own account and then segregated.

1. (1)

   A firm that does not deposit client money with a central bank must exercise all due skill, care and diligence in the selection, appointment and periodic review of the CRD credit institution, bank or qualifying money market fund where the money is deposited and the arrangements for the holding of this money. 6

2. (2)

   The firm must consider the need for diversification as part of its due diligence under (1).6

[Note: article 4(2) first sub-paragraph of the MiFID Delegated Directive6]

When a firm makes the selection, appointment and conducts the periodic review of a CRD credit institution, a bank or a qualifying money market fund, it must take into account:

1. (1)

   the expertise and market reputation of the third party with a view to ensuring the protection of clients’ rights6; and

2. (2)

   any legal or regulatory6 requirements or market practices related to the holding of client money that could adversely affect clients' rights.

[Note: article 4(2) second sub-paragraph of the MiFID Delegated Directive6]

A firm must take the necessary steps to ensure that client money deposited, in accordance with CASS 7.13.3 R, in a central bank, a credit institution, a bank authorised in a third country6 or a qualifying money market fund is held in an account or accounts identified separately from any accounts used to hold money belonging to the firm.

[Note: article 2(1)(e) of the MiFID Delegated Directive6]

1. (1)

   An account which the firm uses to deposit client money under CASS 7.13.3 R (1) to CASS 7.13.3 R (3) must be a client bank account.

2. (2)

   In respect of each8 client bank account used by a firm to satisfy its obligation under CASS 7.13.3R(1) to (3)8:

   1. (a)

      the relevant bank's contractual counterparty must be the firm itself8; and

   2. (b)

      ) subject to paragraph (3A),8 the firm must be8 able to make withdrawals of client money promptly and, in any event, within one business day of a request for withdrawal.

   Transitional provision CASS TP 1.1.10AR applies to (2).

3. (3)

   [deleted]8

4. (3A)

   Where the requirement under sub-paragraph (2)(b) is not satisfied and provided that the client bank account is not included in a sub-pool, a firm may use a client bank account from which it will be unable to make a withdrawal of client money until the expiry of a period lasting:8

   1. (a)

      up to 30 days; or8

   2. (b)

      provided the firm complies with CASS 7.13.14AR, from 31 to 95 days.8

5. (4)

   Paragraphs (2)(b) and (3A)8 do not apply in respect of client money received by a firm in its capacity as a trustee firm.

8A firm may only use one or more client bank accounts under CASS 7.13.13R(3A)(b) if:

1. (1)

   prior to using any such client bank accounts, it:

   1. (a)

      produces a written policy that sets out:

      1. (i)

         for each of its business lines, the maximum proportion of the client money held by the firm that the firm considers would be appropriate to hold in such client bank accounts having regard to the need to manage the risk of the firm being unable to access client money when required;

      2. (ii)

         the firm’s rationale for reaching its conclusion(s) under (i); and

      3. (iii)

         the measures that it will put into place to comply with sub-paragraph (2)(a) of this rule, having regard to CASS 7.13.14CE; and

   2. (b)

      provides each of its clients with a written explanation of the risks that arise as a result of the longer notice period for withdrawals that:

      1. (i)

         is clear, fair and not misleading; and

      2. (ii)

         in respect of the medium of the explanation, satisfies whichever of COBS 6.1.13R (Medium of disclosure) or COBS 6.1ZA.19EU (Medium of disclosure) applies to the firm in respect of its obligations to provide information to the client; and

2. (2)

   while the firm uses any such client bank accounts, it:

   1. (a)

      takes appropriate measures to manage the risk of the firm being unable to access client money when required;

   2. (b)

      keeps its written policy under sub-paragraph (1)(a) under review, amending it where necessary; and

   3. (c)

      provides any of its clients to whom it has not previously provided the explanation under sub-paragraph (1)(b) with such a written explanation before it starts to hold or receive client money for them.

1. (1)

   8A firm must make and retain a written record of:

   1. (a)

      the written policy it produces under CASS 7.13.14AR(1)(a); and

   2. (b)

      each subsequent version of the written policy it produces as a result of CASS 7.13.14AR(2)(b).

2. (2)

   The firm must make the record:

   1. (a)

      under sub-paragraph (1)(a) on the date it produces the written policy; and

   2. (b)

      under sub-paragraph (1)(b) on the date it produces the new version of the written policy.

3. (3)

   The firm must keep each record under this rule for a period of five years after the earlier of:

   1. (a)

      the date on which the version of the policy to which the record relates was superseded; and

   2. (b)

      the date on which the firm ceased to use client bank accounts under CASS 7.13.13R(3A)(b).

Notwithstanding the requirement at CASS 7.13.22 R a firm must limit the funds that it deposits or holds with a relevant group entity or combination of such entities so that the value of those funds do not at any point in time exceed 20 per cent of the total of all the client money held by the firm under CASS 7.13.3R6.

[Note: article 4(3) first sub-paragraph of the MiFID Delegated Directive]6

For the purpose of CASS 7.13.20 R an entity is a relevant group entity if it is:

1. (1)
   1. (a)

      a CRD credit institution; or 6

   2. (b)

      a bank authorised in a third country; or6

   3. (c)

      a qualifying money market fund; or6

   4. (d)

      the entity operating or managing the qualifying money market fund; and6

2. (2)

   a member of the same group as that firm.

[Note: article 4(3) first sub-paragraph of the MiFID Delegated Directive]6

1. (1)

   6A firm need not comply with CASS 7.13.20R if, following an assessment, it is able to demonstrate that the requirement under that rule is not proportionate, in view of:

   1. (a)

      the small balance of client money that it holds;

   2. (b)

      the nature, scale and complexity of its business; and

   3. (c)

      the safety offered by the relevant third parties referred to under CASS 7.13.20R.

2. (2)

   A firm must review any assessment it makes under (1) periodically.

3. (3)

   A firm must notify its assessment under (1) and its reviewed assessments under (2) to the FCA in accordance with CASS 7.13.21CR.

[Note: article 4(3) second sub-paragraph of the MiFID Delegated Directive]

1. 6Where a firm decides following an assessment under CASS 7.13.21AR(1) that it intends to use the approach under that rule, the firm must give the FCA notice of this upon reaching that decision and before it starts to use that approach.

2. Where, following a review under CASS 7.13.21AR(2) a firm decides that it will either cease to use the approach under CASS 7.13.21AR(1) or continue to use it, it must give the FCA notice of this upon reaching that decision.

Subject to the requirement at CASS 7.13.20 R, and in accordance with Principle 10 and CASS 7.12.1 R, a firm must:

1. (1)

   periodically review6 whether it is appropriate to diversify (or further diversify) the third parties with which it deposits some or all of the client money that the firm holds; and

2. (2)

   whenever it concludes that it is appropriate to do so, it must make adjustments accordingly to the third parties it uses and to the amounts of client money deposited with them.

[Note: article 4(2) first sub-paragraph of the MiFID Delegated Directive]6

1. (1)

   A firm must make a record of the grounds upon which it satisfies itself as to the appropriateness of its selection and appointment of a bank or a qualifying money market fund under CASS 7.13.8 R. The firm must make the record on the date it makes the selection or appointment and must keep it from that date until five years after the firm ceases to use that particular person for the purposes of depositing client money under CASS 7.13.3 R.

2. (2)

   A firm must make a record of each periodic review of its selection and appointment of a bank or a qualifying money market fund that it conducts under CASS 7.13.8 R, its considerations and conclusions. The firm must make the record on the date it completes the review and must keep it from that date until five years after the firm ceases to use that particular person for the purposes of depositing client money under CASS 7.13.3 R.

3. (3)

   A firm must make a record of each periodic review that it conducts under CASS 7.13.22 R, its considerations and conclusions. The firm must make the record on the date it completes out the review and must keep it for five years from that date.

Where a firm deposits client money with a qualifying money market fund, the firm's holding of those units or shares6 in that fund will be subject to any applicable requirements of the custody rules.

1. (1)

   A firm must inform a client that money placed with a qualifying money market fund will not be held in accordance with the requirements for holding client money.6

2. (2)

   A firm must ensure that, having provided the information to the client under (1), the client gives its explicit consent to the placement of their money in a qualifying money market fund. 6

A firm may segregate client money in a different currency from that in which it was received or in which the firm is liable to the relevant client. If it does so the firm must ensure that the amount held is adjusted each day to an amount at least equal to the original currency amount (or the currency in which the firm has its liability to its clients, if different), translated at the previous day's closing spot exchange rate.

Except in the circumstances described in CASS 7.13.72 R (1)(a), where a firm using the normal approach receives a mixed remittance it should:

1. (1)

   in accordance with CASS 7.13.6 R, take necessary steps to ensure the mixed remittance is paid directly into a client bank account; and

2. (2)

   promptly and, in any event no later than one business day after the payment of the mixed remittance into the client bank account has cleared, pay the money that is not client money out of the client bank account.

Where a firm receives client money in the form of cash, a cheque or other payable order, it must:

1. (1)

   pay the money in accordance with CASS 7.13.6 R, promptly, and no later than on the business day after it receives the money into a client bank account, unless either:

   1. (a)

      the money is received by a business line for which the firm uses the alternative approach, in which case the money must be paid into the firm's own bank account promptly, and no later than on the business day after it receives the money; or

   2. (b)

      the firm is unable to meet the requirement in (1) because of restrictions under the regulatory system or law regarding the receipt and processing of money, in which case the money must be paid in accordance with CASS 7.13.6 R as soon as possible;

2. (2)

   if the firm holds the money in the meantime before paying it in accordance with CASS 7.13.6 R (or in the case of (1)(a), into its own bank account), hold it in a secure location in line with Principle 10; and

3. (3)

   in any case, record the receipt of the money in the firm's books and records in line with CASS 7.15 (Records, accounts and reconciliations).

Where a firm receives client money in the form of a cheque that is dated with a future date, unless the firm returns the cheque it must:

1. (1)

   pay the money in accordance with CASS 7.13.6 R, promptly, and no later than the date on the cheque if the date is a business day or the next business day after the date on the cheque;

2. (2)

   in the meantime, hold it in a secure location in accordance with Principle 10; and

3. (3)

   record the receipt of the money in the firm's books and records in accordance with CASS 7.15 (Records, accounts and reconciliations).

A firm must ensure that client money received by its appointed representatives, tied agents, field representatives or other agents is:

1. (1)

   received directly into a client bank account of the firm, where this would have been required if such client money had been received by the firm otherwise than through its appointed representatives, tied agents, field representatives or other agents (see CASS 7.13.6 R and CASS 7.13.7 G); or

2. (2)

   if it is received in the form of a cheque or other payable order:

   1. (a)

      paid into a client bank account of the firm promptly and, in any event, no later than the next business day after receipt; or

   2. (b)

      forwarded to the firm or, in the case of a field representative, forwarded to a specified business address of the firm, to ensure that the money arrives at the specified business address promptly and, in any event, no later than the close of the third business day.

1. (1)

   A firm must allocate any client money it receives to an individual client promptly and, in any case, no later than ten business days following the receipt (or where subsequent to the receipt of money it has identified that the money, or part of it, is client money under CASS 7.13.37 R, no later than ten business days following that identification).

2. (2)

   Pending a firm's allocation of a client money receipt to an individual client under (1), it must record the received client money in its books and records as "unallocated client money".

If a firm receives money (either in a client bank account or an account of its own) which it is unable to immediately identify as client money or its own money, it must:

1. (1)

   take all necessary steps to identify the money as either client money or its own money;

2. (2)

   if it considers it reasonably prudent to do so, given the risk that client money may not be adequately protected if it is not treated as such, treat the entire balance of money as client money and record the money in its books and records as "unidentified client money" while it performs the necessary steps under (1).

7CASS 7.13.39R and CASS 7.13.40G do not apply to a firm following a primary pooling event.

Pursuant to the client money segregation requirements, a firm that is operating the normal approach and is liable to pay money7 to a client must7 promptly, and in any event no later than one business day after the money is due and payable, pay the money:

1. (1)

   to, or to the order of, the client; or

2. (2)

   into a client bank account.

1. (1)

   7Subject to paragraph (2), CASS 7.13.41R to CASS 7.13.49R do not apply to a firm following a primary pooling event.

2. (2)

   If, at the time of a primary pooling event, a firm has retained money in a client bank account for the purposes of CASS 7.13.41R, that money remains client money for the purposes of the client money rules and the client money distribution and transfer rules.

If it is prudent to do so to prevent a shortfall in client money on the occurrence of a primary pooling event, a firm may pay money of its own into a client bank account and subsequently retain that money in the client bank account (prudent segregation). Money that the firm retains in a client bank account under this rule7 is client money for the purposes of the client money rules and the client money distribution and transfer rules7.

If a firm intends to pays its own money into a client bank account under CASS 7.13.41 R it must establish a written policy that is approved by its governing body (and retain such policy for a period of at least five years after the date it ceases to retain such money in a client bank account under CASS 7.13.41 R) detailing:

1. (1)

   the specific anticipated risks in relation to which it would be prudent for the firm to make such payments into a client bank account;

2. (2)

   why the firm considers that the use of such a payment is a reasonable means of protecting client money against each of the risks set out in the policy; and

3. (3)

   the method that the firm will use to calculate the amount required to address each risk set out in the policy.

The firm may amend its written policy to reflect changes in the specific anticipated risks in relation to which it would be prudent for the firm to make payments into a client bank account under CASS 7.13.41 R.

The firm's written policy must not conflict with the client money rules or the client money distribution and transfer rules7. If there is a conflict, the client money rules and the client money distribution and transfer rules7 will prevail.

To the extent that the firm no longer considers it prudent to retain money in its client bank account pursuant to CASS 7.13.41 R in order to ensure that client money is protected, the firm may cease to treat that money as client money.

Any money that the firm ceases to treat as client money pursuant to CASS 7.13.48 R must be withdrawn from its client bank account as an excess under CASS 7.15.29 R as part of its next reconciliation.

1. (1)

   7Subject to paragraph (2), CASS 7.13.50R to CASS 7.13.52G do not apply to a firm following a primary pooling event.

2. (2)

   Where a firm holds a prudent segregation record under CASS 7.13.53R following a primary pooling event, the prudent segregation record must continue to satisfy the requirements set out in CASS 7.13.51R.

A firm must create and keep up-to-date records so that the amount of money paid into client bank accounts and retained as client money pursuant to CASS 7.13.41 R or withdrawn pursuant to CASS 7.13.49 R, and the reasons for such payment, retention and withdrawal can be easily ascertained (the prudent segregation record).

The prudent segregation record must record:

1. (1)

   the outcome of the firm's calculation of its prudent segregation;

2. (2)

   the amounts paid into or withdrawn from a client bank account pursuant to CASS 7.13.41 R or CASS 7.13.49 R;

3. (3)

   why each payment or withdrawal is made;

4. (4)

   in respect of the firm's written policy required by CASS 7.13.43 R the firm must record, as applicable, either:

   1. (a)

      that the payment or withdrawal is made in accordance with that policy; or

   2. (b)

      that the policy will be created or amended to include the reasons for this payment or withdrawal;

5. (5)

   that the money was paid by the firm in accordance with CASS 7.13.41 R or withdrawn by the firm in accordance with CASS 7.13.49 R; and

6. (6)

   the up-to-date total amount of client money held pursuant to CASS 7.13.41 R.

The prudent segregation record must be retained for five years after the firm ceases to retain money as client money pursuant to CASS 7.13.41 R.

1. (1)

   7Subject to paragraphs (2) and (3), CASS 7.13.59R, CASS 7.13.62R(3), CASS 7.13.62R(4) and CASS 7.13.63R to CASS 7.13.67R do not apply to a firm following its failure.

2. (2)

   If, at the time of a primary pooling event, a firm has retained money in a client bank account for the purposes of alternative approach mandatory prudent segregation under CASS 7.13.65R, that money remains client money for the purposes of the client money rules and the client money distribution and transfer rules.

3. (3)

   Where a firm holds an alternative approach mandatory prudent segregation record under CASS 7.13.68R following a primary pooling event, the alternative approach mandatory prudent segregation record must continue to satisfy the requirements set out in CASS 7.13.67R.

A firm that wishes to adopt the alternative approach for a particular business line must first establish, and document in writing, its reasons for concluding, that:

1. (1)

   adopting the normal approach would lead to greater operational risks to client money protection compared to the alternative approach;

2. (2)

   adopting the alternative approach (including complying with the requirements for alternative approach mandatory prudent segregation under CASS 7.13.65 R), would not result in undue operational risk to client money protection; and

3. (3)

   the firm has systems and controls that are adequate to enable it to operate the alternative approach effectively and in compliance with Principle 10 (Clients' assets).

A firm must retain any documents created under CASS 7.13.55 R in relation to a particular business line for a period of at least five years after the date it ceases to use the alternative approach in connection with that business line.

At least three months before adopting the alternative approach for a particular business line, a firm must:

1. (1)

   inform the FCA in writing that it intends to adopt the alternative approach for that particular business line; and

2. (2)

   if requested by the FCA, make any documents it created under CASS 7.13.55 R2 available to the FCA for inspection.

1. (1)

   In addition to the requirement under CASS 7.13.57 R, before adopting the alternative approach, a firm must send a written report to the FCA prepared by an independent auditor of the firm in line with a reasonable assurance engagement, stating the matters set out in (2).

2. (2)

   The written report in (1) must state whether, in the auditor's opinion:

   1. (a)

      the firm's systems and controls are suitably designed to enable it to comply with CASS 7.13.62 R to CASS 7.13.65 R; and

   2. (b)

      the firm's calculation of its alternative approach mandatory prudent segregation amount under CASS 7.13.65 R is suitably designed to enable the firm to comply with CASS 7.13.65 R.

1. (1)

   A firm that uses the alternative approach must review, at least on an annual basis and with no more than one year between each review, whether its reasons for adopting the alternative approach for a particular business line, as documented under CASS 7.13.55 R, continue to be valid.

2. (2)

   If, following the review in (1), a firm finds that its reasons for adopting the alternative approach are no longer valid for a particular business line, it must stop using the alternative approach for that business line as soon as reasonably practicable, and in any event within six months of the conclusion of its review in (1).

A firm that uses the alternative approach must not materially change how it will calculate and maintain the alternative approach mandatory prudent segregation amount under CASS 7.13.65 R unless:

1. (1)

   an auditor of the firm has prepared a report that complies with the requirements in CASS 7.13.58 R (2)(b) in respect of the firm's proposed changes; and

2. (2)

   the firm provides a copy of the report prepared by the auditor under (a) to the FCA before implementing the change.

A firm that uses the alternative approach for a particular business line must, on each business day ('T0'):

1. (1)

   receive any money from and pay any money to (or, in either case, on behalf of) clients into and out of its own bank accounts;

2. (2)

   perform the necessary reconciliations of records and accounts required under CASS 7.15 (Records, accounts and reconciliations);

3. (3)

   adjust the balances held in its client bank account (by effecting transfers between its own bank account and its client bank account) to address any difference arising between its client money requirement and its client money resource as at the close of business on the previous business day ('T-1'), so that the correct amount reflected in the reconciliations under (2) is segregated in its client bank account; and

4. (4)

   subject to CASS 7.13.63R below, keep segregated in its client bank account the balance held under (3) until it has performed a reconciliation on the following business day ('T+1') and as a result of that reconciliation is undertaking further adjustments under (3).

During the period between the adjustment in CASS 7.13.62 R (3) and the completion of the next reconciliations in CASS 7.13.62 R (2), a firm that uses the alternative approach for a particular business line may:

1. (1)

   increase the balance held in its client bank account by making intra-day transfers (during T0) from its own bank account to its client bank account before the completion of the internal client money reconciliation under CASS 7.13.62 R (2) (that is expected sometime later on T0) only if:

   1. (a)

      the firm reasonably expects that the client money requirement for the previous business day (T-1) will increase above the client money resource currently (during T0) held in its client bank account; and

   2. (b)

      such reasonable expectations are based on the working calculation of the client money requirement relating to the previous business day (T-1) that the firm has already determined on that business day (during T0) (as part of the process of completing its internal client money reconciliation); or

2. (2)

   decrease the balance held in its client bank account by making intra-day transfers (during T0) from its client bank account to its own bank account before the completion of the internal client money reconciliation under CASS 7.13.62 R (2) (that is expected sometime later on T0) only if:

   1. (a)

      the firm reasonably expects that the client money requirement for the previous business day (T-1) will decrease below the client money resource currently held (during T0) in its client bank account; and

   2. (b)

      such reasonable expectations are based on the working calculation of the client money requirement relating to the previous business day (T-1) that the firm has already determined on that business day (during T0) (as part of the process of completing its internal client money reconciliation).

However, in doing so, a firm must act prudently and should take appropriate steps to manage the risk of not having segregated an amount that appropriately reflects its actual client money requirement at any given time.

1. (1)

   A firm that uses the alternative approach must, in addition to CASS 7.13.62 R, pay an amount (determined in accordance with this rule) of its own money into its client bank account and subsequently retain that money in its client bank account (alternative approach mandatory prudent segregation). The amount segregated by a firm in its client bank account under this rule is client money for the purposes of the client money rules and the client money distribution and transfer rules7.

2. (2)

   The amount required to be segregated under this rule must be an amount that a firm reasonably determines would be sufficient, at the time it makes the determination, to protect client money against the risk that at any time in the following three months the following categories of client money may not have been fully segregated in its client bank account or may not be (or become) available for pooling under CASS 7A.2.4R (1), were a primary pooling event to occur:

   1. (a)

      client money that is received and held by the firm in its own bank account during the period between:

      1. (i)

         the firm's adjustment of client bank account balances under CASS 7.13.62 R (3) on a particular business day; and

      2. (ii)

         the firm's subsequent adjustments under CASS 7.13.62 R (3) on the following business day; and

   2. (b)

      money received and held by the firm in its own bank account which the firm does not initially identify as part of its client money requirement, but which subsequently does become part of its client money requirement;

   with the effect that the firm's alternative approach mandatory prudent segregation under this rule will reduce, as far as possible, any shortfall that might have been produced as a result of (a) or (b) on the occurrence of a primary pooling event.

3. (3)
   1. (a)

      Subject to (c), in reaching its determination under (2) of the amount of money that would be sufficient to address the risks referred to in (2) for the forthcoming three months, a firm must take into account the following in respect of each business line for which it uses the alternative approach, and for at least the previous three months:

      1. (i)

         the firm's client money requirement over the course of that prior period (excluding any amount that was required to be segregated under this rule during that prior period for the purposes of alternative approach mandatory prudent segregation);

      2. (ii)

         the daily adjustment payments that the firm made into its client bank account under CASS 7.13.62 R (3) during that prior period; and

      3. (iii)

         the amount of money received by the firm in its own bank account which it did not initially identify as part of its client money requirement, but which subsequently, and during that prior period, became part of its client money requirement;

   as shown in its internal records.

   1. (b)

      In reaching its determination under (2) a firm must also take into account, but at all times having regard to the requirement under (2), any impact that particular events, the seasonal nature of each relevant business line, or any other aspect of those business lines may have on:

      1. (i)

         the firm's client money requirement during the forthcoming three months for which the amount of alternative approach mandatory prudent segregation required under this rule is being determined;

      2. (ii)

         the daily adjustment payments that the firm is likely to make into its client bank account under CASS 7.13.62 R (3) in that same period; and

      3. (iii)

         the amount of unidentified receipts of money that the firm is likely to receive into its own bank account and which will subsequently, in that same period, become part of its client money requirement.

   2. (c)

      If, at the time of its determination under (2), the firm has not been trading for three months in a business line for which it is using the alternative approach, then it must use the records that are available to it and must also factor in reasonable forecasts, as required under (b), to establish a three-month reference period.

4. (4)
   1. (a)

      A firm must, at regular intervals that are at least quarterly, repeat and complete the combined process of:

      1. (i)

         determining the amount that it is required to segregate for the purposes of alternative approach mandatory prudent segregation under (2) and (3);

      2. (ii)

         making necessary adjustments to its records to reflect any changes to its client money requirement (in accordance with CASS 7.16.16 R (3) and CASS 7.16.17 R (2)); and

      3. (iii)

         paying any additional amounts of its own money into its client bank account to increase the firm's alternative approach mandatory prudent segregation or withdrawing any excess amounts from its client bank account to decrease the firm's alternative approach mandatory prudent segregation after it has adjusted its records under (ii).

   2. (b)

      The combined process of (a)(i) to (iii) must take no longer than ten business days.

   3. (c)

      To the extent that a firm's compliance with (a)(i) and (ii) results in there being an excess in the firm's client bank account, the firm may cease to treat that money as client money.

5. (5)

   A firm must ensure that the individual responsible for CASS oversight under CASS 1A.3.1 R, CASS 1A.3.1A R or CASS 1A.3.1C R (as appropriate) reviews the adequacy of the amount of the firm's alternative approach mandatory prudent segregation maintained under this rule at least annually.

A firm must create and keep up-to-date records so that any amount of money that is, pursuant to CASS 7.13.65 R:

1. (1)

   paid into a client bank account and retained as client money; or

2. (2)

   withdrawn from a client bank account;

can be easily ascertained (the alternative approach mandatory prudent segregation record).

The alternative approach mandatory prudent segregation record under CASS 7.13.66 R must record:

1. (1)

   the date of the first determination under CASS 7.13.65 R (2) and each subsequent review undertaken under CASS 7.13.65 R (4), and the total amount that the firm determined was required to be segregated under CASS 7.13.65 R (2) as at that date;

2. (2)

   the date of any payment of the firm's own money into a client bank account, or withdrawal of any excess from a client bank account under CASS 7.13.65 R, and for each such occasion:

   1. (a)

      the amount of the payment or withdrawal;

   2. (b)

      the fact that the money was paid or withdrawn by the firm in accordance with CASS 7.13.65 R; and

   3. (c)

      as at that date, the total amount actually segregated by the firm under CASS 7.13.65 R.

The alternative approach mandatory prudent segregation record must be retained for five years after the firm ceases to segregate any money in accordance with CASS 7.13.65 R.

A firm that is also a clearing member that is using the normal approach in connection with regulated clearing arrangements must use reasonable endeavours to ensure it is not required under its arrangements with an authorised central counterparty to receive mixed remittances from or pay mixed remittances to the authorised central counterparty through a single bank account.

1. (1)

   If, notwithstanding its reasonable endeavours in accordance with CASS 7.13.71 R, the firm is required under its arrangements with an authorised central counterparty to:

   1. (a)

      receive mixed remittances from the authorised central counterparty 5 into a single bank account and pay mixed remittances to the authorised central counterparty from that bank account; or

   2. (b)

      pay mixed remittances to the authorised central counterparty using a single bank account;

then such arrangements for client money are permitted if the firm complies, 5as applicable, with (2) and CASS 7.13.73 R.

1. (2)
   1. (a)

      In either or both of the circumstances described in (1):5

      5
      1. (i)

         the firm must pay any mixed remittances to the authorised central counterparty 5from its own bank account; and5

         5
      2. (ii)

         the firm is permitted to pay any remittances to the authorised central counterparty that consist only of client money from that same bank account.

   2. (aa)

      In the circumstances described in (1)(a), the firm is permitted to receive any remittances that consist only of client money from the authorised central counterparty into the same bank account that it uses under (2)(a), if it complies with (b).5

   3. (b)

      Where, in the circumstances described in (1)(a), a 5mixed remittance or a remittance that consists only of client money from an authorised central counterparty is 5received into a firm's own account, the firm 5 must transfer any 5client money element of the remittance 4to its client bank account promptly and, in any event, no later than the next business day after receipt.

      55555

1. (1)

   7Subject to paragraphs (2) and (3), CASS 7.13.73R to CASS 7.13.75R do not apply to a firm following a primary pooling event.

2. (2)

   If, at the time of a primary pooling event, a firm has retained money in a client bank account for the purposes of clearing arrangement mandatory prudent segregation under CASS 7.13.73R, that money remains client money for the purposes of the client money rules and the client money distribution and transfer rules.

3. (3)

   Where a firm holds a clearing arrangement mandatory prudent segregation record under CASS 7.13.76R following a primary pooling event, the clearing arrangement mandatory prudent segregation record must continue to satisfy the requirements set out in CASS 7.13.75R.

1. (1)

   Where the circumstances described in CASS 7.13.72 R (1)(a) apply to a firm it must pay an amount (determined in accordance with this rule) of its own money into its client bank account and retain that money in its client bank account (clearing arrangement mandatory prudent segregation). The amount segregated by a firm in its client bank account under this rule will be client money for the purposes of the client money rules and the client money distribution and transfer rules7.

2. (2)

   The amount required to be segregated under this rule must be an amount that a firm reasonably determines would be sufficient, at the time it makes the determination, to protect client money against the risk that at any time in the following three months client money received from the authorised central counterparty and held by the firm in its own bank account following receipt of these monies underCASS 7.13.72 R (1)(a) and until their transfer in accordance with CASS 7.13.72 R (2)(b) may not have been fully segregated in its client bank account or may not be (or become) available for pooling under CASS 7A.2.4R (1), were a primary pooling event to occur with the effect that the firm's clearing arrangement mandatory prudent segregation under this rule will reduce, as far as possible, any shortfall that might have been produced as a result of this risk on the occurrence of a primary pooling event.

3. (3)
   1. (a)

      Subject to (c), in reaching its determination under (2) of the amount of money that would be sufficient to address the risks referred to in (2) for the forthcoming three months, a firm must take into account the following for at least the previous three months:

      1. (i)

         the firm's client money requirement over the course of that prior period (excluding any amount that was required to be segregated under this rule during that prior period for the purposes of clearing arrangement mandatory prudent segregation); and

      2. (ii)

         the payments that the firm made into its client bank account under CASS 7.13.72 R (2)(b) during that prior period;

   as shown in its internal records.

   1. (b)

      In reaching its determination under (2) a firm must also take into account, at all times having regard to the requirement under (2), any impact that particular events, the seasonal nature of each relevant business line, or any other aspect of those business line(s) may have on:

      1. (i)

         the firm's client money requirement during the forthcoming three months for which the amount of clearing arrangement mandatory prudent segregation required under this rule is being determined; and

      2. (ii)

         the payments that the firm is likely to make into its client bank account under CASS 7.13.72 R (2)(b).

   2. (c)

      If, at the time of its determination under (2), the firm has not been trading for three months in a business line for which it is using the normal approach in connection with regulated clearing arrangements, then it must use the records that are available to it and must also factor in reasonable forecasts, as required under (b), to make up a three-month reference period.

4. (4)
   1. (a)

      A firm must, at regular intervals that are at least quarterly, repeat and complete the combined process of:

      1. (i)

         determining the amount that it is required to segregate for the purposes of clearing arrangement mandatory prudent segregation under (2) and (3);

      2. (ii)

         making necessary adjustments to its records to reflect any changes to its client money requirement in accordance with CASS 7.16.16 R (3) and CASS 7.16.17 R (1); and

      3. (iii)

         paying any additional amounts of its own money into its client bank account to increase the firm's clearing arrangement mandatory prudent segregation or withdrawing any excess amounts from its client bank account to decrease the firm's clearing arrangement mandatory prudent segregation after it has adjusted its records under (ii).

   2. (b)

      The combined process of (a)(i) to (iii) must take no longer than ten business days.

   3. (c)

      To the extent that a firm's compliance with (a)(i) and (ii) results in there being an excess in the firm's client bank account, the firm may cease to treat that money as client money.

5. (5)

   A firm must ensure that the individual responsible for CASS oversight under CASS 1A.3.1 R, CASS 1A.3.1A R or CASS 1A.3.1C R (as appropriate) reviews the adequacy of the amount of the firm's clearing arrangement mandatory prudent segregation maintained under this rule at least annually.

A firm must create and keep up-to-date records so that any amount of money that is, pursuant to CASS 7.13.73 R:

1. (1)

   paid into a client bank account and retained as client money; or

2. (2)

   withdrawn from a client bank account;

can be easily ascertained (the clearing arrangement mandatory prudent segregation record).

The clearing arrangement mandatory prudent segregation record under CASS 7.13.74 R must record:

1. (1)

   the date of the first determination under CASS 7.13.73 R (2) and each subsequent review undertaken under CASS 7.13.73 R (4), and the total amount that the firm determined was required to be segregated under CASS 7.13.73 R (2) as at that date;

2. (2)

   the date of any payment of the firm's own money into a client bank account, or withdrawal of any excess from a client bank account under CASS 7.13.73 R (4)(a)(iii), and for each such occasion:

   1. (a)

      the amount of the payment or withdrawal;

   2. (b)

      the fact that the money was paid or withdrawn by the firm in accordance with CASS 7.13.73 R; and

   3. (c)

      as at that date, the total amount actually segregated by the firm under CASS 7.13.73 R.

The clearing arrangement mandatory prudent segregation record must be retained for five years after the firm ceases to segregate any money in accordance with CASS 7.13.73 R.