Reset to Today

To access the FCA Handbook Archive choose a date between 1 January 2001 and 31 December 2004.

Content Options:

Content Options

View Options:

CASS 7.6 Records, accounts and reconciliations

Records and accounts

CASS 7.6.-1R

33Where a firm establishes one or more sub-pools, the provisions of CASS 7.6 (Records, accounts and reconciliations) 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 7.19.4 R.

CASS 7.6.1R

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]

CASS 7.6.2R

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]

Client entitlements

CASS 7.6.3G

Pursuant to CASS 7.6.2 R (Records and accounts),2 and where relevant 1 SYSC 4.1.1 R (General requirements)2and SYSC 6.1.1 R (Compliance),2 a firm should take reasonable steps to ensure that it2 is notified promptly of any receipt of client money in the form of a client entitlement.

Record keeping

CASS 7.6.4R

Unless otherwise stated, a3 firm must ensure that any record3 made under the client money rules is3 retained for a period of five years starting from the later of:3

3333
  1. (1)

    the date it was created; and3

  2. (2)

    (if it has been modified since the date it was created), the date it was most recently modified.3

CASS 7.6.5G

A firm should ensure that it makes proper records, sufficient to show and explain the firm's transactions and commitments in respect of its client money.

Internal reconciliations of client money balances

CASS 7.6.6G
  1. (1)

    Carrying out internal reconciliations of records and accounts of the entitlement of each client for whom the firm holds client money with the records and accounts of the client money the firm holds in client bank accounts and client transaction accounts should be one of the steps a firm takes to satisfy its obligations under CASS 7.6.2 R, and where relevant1 SYSC 4.1.1 R and SYSC 6.1.1 R.

    1
  2. (2)

    A firm should perform such internal reconciliations:

    1. (a)

      as often as is necessary; and

    2. (b)

      as soon as reasonably practicable after the date to which the reconciliation relates;

    to ensure the accuracy of the firm's records and accounts.

  3. (3)

    The standard method of internal client money reconciliation sets out a method of reconciliation of client money balances that the FCA believes should be one of the steps that a firm takes when carrying out internal reconciliations of client money.

Non-standard method of internal client money reconciliation

CASS 7.6.6AR
  1. (1)

    3Before using a non-standard method of internal client money reconciliation, a firm must:

    1. (a)

      establish and document in writing its reasons for concluding that the method of internal client money reconciliation it proposes to use will:

      1. (i)

        (for the normal approach to segregating client money) check whether the amount of client money recorded in the firm's records as being segregated in client bank accounts meets the firm's obligation to its clients under the client money rules on a daily basis; or

      2. (ii)

        (for the alternative approach to segregating client money) calculate the amount of client money to be segregated in client bank accounts which meets the firm's obligations to its clients under the client money rules on a daily basis;

    2. (b)

      notify the FCA of its intentions to use a non-standard method of internal client money reconciliation; and

    3. (c)

      send a written report to the FCA prepared by an independent auditor of the firm in line with a reasonable assurance engagement and stating the matters set out in CASS 7.6.6A R (2).

  2. (2)

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

    1. (a)

      the method of internal client money reconciliation which the firm will use is suitably designed to enable it to (as applicable):

      1. (i)

        (for the normal approach to segregating client money) check whether the amount of client money recorded in the firm's records as being segregated in client bank accounts meets the firm's obligation to its clients under the client money rules on a daily basis; or

      2. (ii)

        (for the alternative approach to segregating client money) calculate the amount of client money to be segregated in client bank accounts which meets the firm's obligations to its clients under the client money rules on a daily basis; and

    2. (b)

      the firm's systems and controls are suitably designed to enable it to carry out the method of internal client money reconciliation the firm will use.

  3. (3)

    A firm using a non-standard method of internal client money reconciliation must not materially change its method of undertaking internal reconciliations of client money balances unless:

    1. (a)

      the firm has established and documented in writing its reasons for concluding that the changed methodology will meet the requirements in (1)(a)(i) and (ii), as applicable;

    2. (b)

      an auditor of the firm has prepared a report that complies with the requirements in (1)(c) and (2) in respect of the firm's proposed changes; and

    3. (c)

      the firm provides a copy of the report prepared by the auditor under (3)(a) to the FCA before implementing the change.

CASS 7.6.6BG

3A firm is reminded that, under SUP 3.4.2 R, it must take reasonable steps to ensure that its auditor has the required skill, resources and experience to perform its function.

CASS 7.6.7R

[deleted]3

CASS 7.6.8R

[deleted]3

Reconciliations with external records

CASS 7.6.9R

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]

Frequency of external reconciliations

CASS 7.6.10G
  1. (1)

    A firm should perform the required reconciliation of client money balances with external records:

    1. (a)

      as regularly as is necessary; and

    2. (b)

      as soon as reasonably practicable after the date to which the reconciliation relates;

    to ensure the accuracy of its internal accounts and records against those of third parties by whom client money is held.

  2. (2)

    In determining whether the frequency is adequate, the firm should consider the risks which the business is exposed, such as the nature, volume and complexity of the business, and where and with whom the client money is held.

Method of external reconciliations

CASS 7.6.11G

A method of reconciliation of client money balances with external records that the FCA believes is adequate is when a firm compares:

  1. (1)

    the balance on each client bank account as recorded by the firm with the balance on that account as set out on the statement or other form of confirmation issued by the bank with which those accounts are held; and

  2. (2)

    the balance, currency by currency, on each client transaction account as recorded by the firm, with the balance on that account as set out in the statement or other form of confirmation issued by the person with whom the account is held;

and identifies any discrepancies between them.

CASS 7.6.12R

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

Reconciliation discrepancies

CASS 7.6.13R

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).

CASS 7.6.14R

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.

CASS 7.6.15R

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.

Notification requirements

CASS 7.6.16R

A firm must inform the FCA 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.

Audit of compliance with the MiFID client money rules

CASS 7.6.17G

Firms are reminded that the auditor of the firm has to confirm in the report submitted to the FCA under SUP 3.10 (Duties of auditors: notification and report on client assets) that the firm has maintained systems adequate to enable it to comply with the client money rules.

CASS 7.6.18G

Firms that do not adopt the normal approach are reminded that the firm's auditor must confirm to the FCA in writing that the firm has in place systems and controls which are adequate to enable it to operate the alternative approach effectively (see CASS 7.4.15 R).

CASS 7.6.19G

Firms that do not use the standard method of internal client money reconciliation are reminded that the firm's auditor must confirm to the FCA in writing that the firm has in place systems and controls which are adequate to enable it to use another method effectively (see CASS 7.6.8 R).