CASS 7.6 Records, accounts and reconciliations

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.

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]

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

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

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.

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 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.