SUP 3.10 Duties of auditors: notification and report on client assets
Application
An auditor of an authorised professional firm need not report under this section in relation to that firm's compliance with the client money rules in the non-directive client money chapter, if that firm3 is regulated by:
33SUP 3.10.5 R(3) does not apply to an auditor of a lead regulated firm or an incoming EEA firm.
Client assets report: content
An auditor of a firm must submit a report addressed to the FSA, signed in his capacity as auditor, which:
- (1)
states the matters set out in SUP 3.10.5 R; or
- (2)
if the firm claims not to hold client money or custody assets, states whether anything has come to the auditor's attention that causes him to believe that the firm held client money or custody assets during the period covered by the report.
Client assets report
Whether in the auditor's opinion |
||
(1) |
the firm has maintained systems adequate to enable it to comply with the custody rules, the collateral rules and the client money rules3 (except CASS 5.2)13 throughout the period since the last date as at which a report was made; 33 |
1
|
(2) |
the firm was in compliance with the custody rules, the collateral rules and the client money rules3 (except CASS 5.2),13 at the date as at which the report has been made; 33 |
1
|
(3) |
in the case of an investment management firm, personal investment firm, a UCITS firm,2 securities and futures firm or BIPRU investment firm,2 when a subsidiary of the firm is a nominee company in whose name custody assets of the firm are registered that nominee company has maintained throughout the year systems for the custody, identification and control of custody assets which: 22 |
|
(a) |
are adequate; and |
|
(b) |
include reconciliations at appropriate intervals between the records maintained (whether by the firm or the nominee company) and statements or confirmations from custodians or from the person who maintains the record of legal entitlement; and |
|
(4) |
if there has been a secondary pooling event during the period, the firm has 1complied with the rules CASS 4.4,3 CASS 5.6 and CASS 7.93 (Client money distribution)1 in relation to that pooling event. 3 |
1
|
Client assets report: period covered
The period covered by a report under SUP 3.10.4 R must end not more than 53 weeks after the period covered by the previous report on such matters, or, if none, after the firm is authorised or becomes a firm to which SUP 3.10 applies.
Client assets report: timing of submission
An auditor must deliver a report under SUP 3.10.4 R to the FSA within a reasonable time from the 3end of each period covered, unless it is the auditor of a firm falling within category (10) of SUP 3.1.2 R.1
31The auditor of a firm falling within category (10) of SUP 3.1.2 R must deliver a report under SUP 3.10.4 R:
1The rights and duties of auditors are set out in SUP 3.8 (Rights and duties of all auditors) and SUP 3.10 (Duties of auditors: notification and report on client assets). SUP 3.8.10 G also refers to the auditor's statutory duty to report certain matters to the FSA imposed by regulations made by the Treasury under sections 342(5) and 343(5) of the Act (information given by auditor or actuary to the FSA). An auditor should bear these rights and duties in mind when carrying out client asset report work, including whether anything should be notified to the FSA immediately.
1It is the responsibility of an insurance intermediary's senior management to determine, on a continuing basis, whether the firm is an exempt insurance intermediary for the purposes of this requirement and to appoint an auditor if management determines the firm is no longer exempt. SUP 3.7 (amplified by SUP 15) sets out what a firm should consider when deciding whether it should notify the FSA of matters raised by its auditor.
Client assets report: requirements not met or inability to form opinion
If the report under SUP 3.10.4 R states that one or more of the applicable requirements described in SUP 3.10.5 R have not been met, the auditor must specify in the report those requirements and the respects in which they have not been met.
If an auditor is unable to form an opinion as to whether one or more of the applicable requirements described in SUP 3.10.5 R have been met, the auditor must specify in the report under SUP 3.10.4 R those requirements and the reasons why the auditor has been unable to form an opinion.
Method of submission of reports
An auditor of a firm must submit a report under SUP 3.10.4 R in accordance with the rules in SUP 16.3.6 R to SUP 16.3.13 R as if those rules applied directly to the auditor.
Service of Notice Regulations
The Financial Services and Markets Act 2000 (Service of Notices) Regulations 2001 (SI 2001/1420) contain provisions relating to the service of documents on the FSA. They do not apply to reports required by SUP 3.10 because of the specific provisions in SUP 3.10.12 R.