CASS 7.6 Records, accounts and reconciliations

A firm must keep such records and accounts as are necessary to enable it, at any time and without delay, to distinguish client money held for one client from client money held for any other client, and from its own money.

[Note: article 16(1)(a) of the MiFID implementing Directive]

A firm must maintain its records and accounts in a way that ensures their accuracy, and in particular their correspondence to the client money held for clients.

[Note: article 16(1)(b) of the MiFID implementing Directive]

A firm must ensure that records made under CASS 7.6.1 R and CASS 7.6.2 R are retained for a period of five years after they were made.

1. (1)

   A firm must make records, sufficient to show and explain the method of internal reconciliation of client money balances under CASS 7.6.2 R used, and if different from the standard method of internal client money reconciliation, to show and explain that:

   1. (a)

      the method of internal reconciliation of client money balances used affords an equivalent degree of protection to the firm's clients to that afforded by the standard method of internal client money reconciliation; and

   2. (b)

      in the event of a primary pooling event or a secondary pooling event, the method used is adequate to enable the firm to comply with the client money distribution rules.

      1
2. (2)

   A firm must make these records on the date it starts using a method of internal reconciliation of client money balances and must keep it for a period of five years after ceasing to use it.

   2

A firm that does not use the standard method of internal client money reconciliation must first send a written confirmation to the FSA from the firm's auditor that the firm has in place systems and controls which are adequate to enable it to use another method effectively.

A firm must conduct, on a regular basis, reconciliations between its internal accounts and records and those of any third parties by whom client money is held.

[Note: article 16(1)(c) of the MiFID implementing Directive]

Any approved collateral held in accordance with the client money rules must be included within this reconciliation.

When any discrepancy arises as a result of a firm's internal reconciliations, the firm must identify the reason for the discrepancy and ensure that:

1. (1)

   any shortfall is paid into a client bank account by the close of business on the day that the reconciliation is performed; or

2. (2)

   any excess is withdrawn within the same time period (but see CASS 7.4.20 G and CASS 7.4.21 R).

When any discrepancy arises as a result of the reconciliation between a firm's internal records and those of third parties that hold client money, the firm must identify the reason for the discrepancy and correct it as soon as possible, unless the discrepancy arises solely as a result of timing differences between the accounting systems of the party providing the statement or confirmation and that of the firm.

While a firm is unable to resolve a difference arising from a reconciliation between a firm's internal records and those of third parties that hold client money, and one record or a set of records examined by the firm during its reconciliation indicates that there is a need to have a greater amount of client money or approved collateral than is in fact the case, the firm must assume, until the matter is finally resolved, that the record or set of records is accurate and pay its own money into a relevant account.

A firm must inform the FSA in writing without delay:

1. (1)

   if it has not complied with, or is unable, in any material respect, to comply with the requirements in CASS 7.6.1 R, CASS 7.6.2 R or CASS 7.6.9 R;

2. (2)

   if having carried out a reconciliation it has not complied with, or is unable, in any material respect, to comply with CASS 7.6.13 R to CASS 7.6.15 R.