Related provisions for CASS 5.5.29
1 - 17 of 17 items.
Where an insurance transaction
involves more than one firm acting
in a chain such that for example money is
transferred from a "producing" broker who has received client money from a retail
customer to an intermediate broker and thereafter to an insurance
undertaking, each broker firm will
owe obligations to its immediate client to
segregate client money which
it receives (in this example the producing broker in relation to the retail customer and the intermediate broker in relation
2When
a firm acts in accordance with CASS
5.3 (Statutory trust) it should not make a payment from the client bank account unless it is satisfied
on reasonable grounds that the client has
provided it with cleared funds. Accordingly, a firm should
normally allow a reasonable period of time for cheques to clear. If a withdrawal
is made and the client's cheque
is subsequently dishonoured it will be the firm's responsibility
to make good the shortfall in
the account as quickly as possible
A firm can
hold client money in either
a general client bank account (CASS 5.5.38 R) or a designated client bank account (CASS 5.5.39 R). A firm holds all client money in general
client bank accounts for its clients as
part of a common pool of money so
those particular clients do
not have a claim against a specific sum in a specific account; they only have
a claim to the client money in
general. A firm holds client money in designated
client bank accounts for those clients who
requested
(1) A firm may draw down commission from
the client bank account if:(a) it
has received the premium from
the client (or from a third party premium finance
provider on the client's behalf);2 and(b) this
is consistent with the firm'sterms of business which it maintains with
the relevant client and 2the insurance undertaking to
whom the premium will become2 payable;and the firm may
draw down commission before
payment of the premium to the insurance undertaking, provided that the
conditions
(1) As
soon as commission becomes due
to the firm (in accordance with CASS
5.5.16 R (1)) it must be treated as a remittance which must be withdrawn in
accordance with CASS
5.5.16 R (2). 2The procedure required by CASS 5.5.16 R will also 2apply where moneyis 2due and payable 2to the firm in
respect of fees due from clients (whether to the firm or
other professionals).(2) Firms are reminded that money received
in accordance with CASS
5.2 must not,
except where a firm and an insurance
(1) Subject
to (4), a 2firm must
in relation to each of its appointed representatives, field representatives and other agents comply
with CASS 5.5.19 R to CASS
5.5.21 R (Immediate segregation) or with CASS 5.5.23 R (Periodic
segregation and reconciliation).(2) A firm must in relation to each representative or other agent keep a record
of whether it is complying with CASS 5.5.19 R to CASS 5.5.21 R or
with CASS 5.5.23 R.(3) A firm is, but without affecting the application
of CASS
(1) A firm must, on a regular basis, and at reasonable
intervals, ensure that it holds in its client
bank account an amount which (in addition to any other amount
which it is required by these rules to
hold) is not less than the amount which it reasonably estimates to be the
aggregate of the amounts held at any time by its appointed
representatives, field representatives,
and other agents.(2) A firm must, not later than ten business days following the expiry of each
period in
(1) CASS 5.5.23 R allows a firm with appointed representatives, field representatives and other agents to
avoid the need for the representative to
forward client money on a daily
basis but instead requires a firm to
segregate into its client money bank account amounts
which it reasonably estimates to be sufficient to cover the amount of client money which the firm expects
its representatives or agents
to receive and hold over a given period. At the expiry of each such period,
the
When a firm receives
a client entitlement on behalf
of a client, it must pay any
part of it which is client money:(1) for client entitlements received in the United Kingdom, into a client
bank account in accordance with CASS 5.5.5 R;
or(2) for client entitlements received outside the United Kingdom, into any bank account operated
by the firm, provided that such client money is:(a) paid
to, or in accordance with, the instructions of the client concerned;
or(b) paid
into a client
(1) A firm may operate as many client accounts
as it wishes.(2) A firm is not obliged to offer its clients the facility of a designated
client bank account.(3) Where
a firm holds money in
a designated client bank account,
the effect upon either:(a) the failure of a bank where any other client bank account is held; or(b) the failure of a third party to whom money has been transferred out of any other client bank account in accordance with CASS 5.5.34 R;(each of which is a secondary
A firm may
hold client money with a bank
that is not an approved bank if
all the following conditions are met:(1) the client money relates to one or more insurance
transactions which are subject to the law or market practice of a jurisdiction
outside the United Kingdom;(2) because
of the applicable law or market practice of that overseas jurisdiction, it
is not possible to hold the client money in
a client bank account with an approved bank;(3) the firm holds the money with
such
A firm owes
a duty of care to a client when
it decides where to place client money.
The review required by CASS 5.5.43 R is intended to ensure that the risks inherent
in placing client money with
a bank are minimised or appropriately diversified by requiring a firm to consider carefully the bank or banks
with which it chooses to place client money.
For example, a firm which is
likely only to hold relatively modest amounts of client
money will be likely to be able to satisfy this
If a client has
notified a firm in writing that
he does not wish his money to
be held with a bank in the same group as
the firm, the firm must
either:(1) place
that client money in a client bank account with another bank in
accordance with CASS
5.5.38 R; or(2) return
that client money to, or pay
it to the order of, the client.
A firm must
not undertake any transaction for a retail customer that involves client money being
passed to another broker or settlement agent located
in a jurisdiction outside the United Kingdom,
unless the firm has previously
disclosed to the retail customer (whether in its terms of business, client agreement 4or otherwise in writing):4(1) that
his client money may be passed
to a person outside the United Kingdom but the client may
notify the firm that he does
not wish his money
(1) In order that a firm may
check that it has sufficient money segregated
in its client bank account (and
held by third parties) to meet its obligations to clients it
is required periodically to calculate the amount which should be segregated
(the client money requirement)
and to compare this with the amount shown as its client
money resource. This calculation is, in the first instance,
based upon the firm's accounting
records and is followed by a reconciliation with its banking
The client
money resource, for the purposes of CASS
5.5.63 R (1)(a),2 is:(1) the
aggregate of the balances on the firm's client money
bank accounts, as at the close of business on the previous business day and, if held in accordance with CASS
5.4, designated investments (valued
on a prudent and consistent basis) together with client
money held by a third party in accordance with CASS 5.5.34 R;
and(2) (but
only if the firm is comparing
the client money resource with
its client's
A firm's client money (accruals)
requirement is the sum of the following:(1) all
insurance creditors shown in the firm's business
ledgers as amounts due to insurance undertakings, clients and other persons;
plus(2) unearned commission 2being the amount of commission 2shown as accrued (but not shown
as due 2and payable) as at the date of
the calculation (a prudent estimate must be used if the firm is
unable to produce an exact figure at the date of the calculation).
A firm which
calculates its client money requirement
on the preceding basis must in addition and within a reasonable period be
able to match its client money resource
to its requirement by reference to individual clients (with
such matching being achieved for the majority of its clients and
transactions).
Money ceases to be client
money if it is paid:(1) to
the client, or a duly authorised
representative of the client;
or(2) to
a third party on the instruction of or with the specific consent of the client, but not if it is transferred to a
third party in the course of effecting a transaction, in accordance with CASS 5.5.34 R; or(3) into
a bank account of the client (not
being an account which is also in the name of the firm);
or(4) to
the firm itself, when it is
due and payable
(1) A firm which pays professional fees (for example
to a loss adjuster or valuer) on behalf of a client may
do so in accordance with CASS
5.5.80 R (2) where this is done on the instruction
of or with the consent of the client.(2) When
a firm wishes to transfer client money balances to a third party in
the course of transferring its business to another firm,
it should do so in compliance with CASS 5.5.80 R and a transferee firm will come under an obligation to treat
any client
For the purposes of CASS 5.1.5 R,
if a firm makes a payment to,
or on the instructions of, a client,
from an account other than a client bank account,
until that payment has cleared, no equivalent sum will become due and payable
to the firm or may be withdrawn
from a client bank account by
way of reimbursement.
If a primary
pooling event occurs:(1) client money held in each client
money account of the firm is
treated as pooled;(2) the firm must distribute that client
money in accordance with CASS 5.3.2 R or,
as appropriate, CASS 5.4.7 R, so that each client receives
a sum which is rateable to the client money entitlement
calculated in accordance with CASS 5.5.66 R; and(3) the firm must, as trustee, call in and make demand
in respect of any debt due to the firm as
trustee, and must liquidate
Client
money received by the firm (including
in its capacity as trustee under CASS
5.4 (Non-statutory trust)) after
a primary pooling event must
not be pooled with client money held
in any client money account
operated by the firm at the
time of the primary pooling event.
It must be placed in a client bank account that
has been opened after that event and must be handled in accordance with the client money rules, and returned to the relevant client without delay, except to the
The client
money (insurance) distribution rules seek to ensure that clients who have previously specified that
they are not willing to accept the risk of the bank that has fails, and who therefore requested that their client money be placed in a designated client bank account as a different
bank, should not suffer the loss of the bank that has failed.
Money held
in each general client bank account of
the firm must be treated as
pooled and:(1) any shortfall in client
money held, or which should have been held, in general client bank accounts, that has arisen
as a result of the failure of
the bank, must be borne by all the clients whose client money is held in a general
client bank account of the firm,
rateably in accordance with their entitlements;(2) a
new client money entitlement
must be calculated for each client by
the firm,
For each client with
a designated client bank account held
at the failed bank:(1) any shortfall in client
money held, or which should have been held, in designated client bank accounts that has
arisen as a result of the failure,
must be borne by all the clients whose client money is held in a designated
client bank account of the firm at
the failed bank, rateably in
accordance with their entitlements;(2) a
new client money entitlement
must be calculated for each of the relevant
Client
money received by the firm after
the failure of a bank, that
would otherwise have been paid into a client
bank account at that bank:(1) must
not be transferred to the failed bank
unless specifically instructed by the client in
order to settle an obligation of that client to
the failed bank; and(2) must
be, subject to (1), placed in a separate client
bank account that has been opened after the secondary
pooling event and either:(a) on
the written instruction of the client,
transferred
Money held
in each general client bank account of
the firm must be treated as
pooled and:(1) any shortfall in client
money held, or which should have been held, in general client bank accounts, that has arisen
as a result of the failure,
must be borne by all the clients whose client money is held in a general
client bank account of the firm,
rateably in accordance with their entitlements;(2) a
new client money entitlement
must be calculated for each client by
the firm, to reflect
Client
money received by the firm after
the failure of another broker
or settlement agent, to whom
the firm has transferred client money that would otherwise have been
paid into a client bank account at
that broker or settlement agent:(1) must
not be transferred to the failed thirty
party unless specifically instructed by the client in
order to settle an obligation of that client to
the failed broker or settlement agent; and(2) must
be, subject to (1), placed in a separate client
bank
(1) A firm need not treat this chapter as applying in respect of a delivery versus payment transaction through a commercial settlement system if it is intended that the
financial instrument
is either to be: (a) in respect of a client's purchase, due to the client within one business day following the client's fulfilment of a payment obligation; or(b) in respect of a client's sale, due to the firm within one business day following the fulfilment of a payment obligation;unless
(1) CASS 5.1 to CASS
5.6 apply, subject to (2), (3) and CASS 5.1.3 R to CASS 5.1.6 R, to a firm that receives
or holds money in the course
of or in connection with its insurance mediation
activity.(2) CASS 5.1 to CASS
5.6 do not, subject to (3), apply:(a) to
a firm to the extent that it
acts in accordance with the non-directive client money chapter or
the MiFID client money
chapter4; or4(b) to
a firm in carrying on an insurance mediation activity which is in
respect of a reinsurance
A firm that
is an approved bank, and relies
on the exemption under CASS
5.1.1 R (2)(e), should be able to account to all of
its clients for amounts held
on their behalf at all times. A bank account opened with the firm that is in the name of the client would generally be sufficient. When money from clients deposited
with the firm is held in a pooled
account, this account should be clearly identified as an account for clients. The firm should
also be able to demonstrate that an
3CASS
5.1.5 R (1)(b) and CASS
5.1.5 R (2) do not apply, and hence money is client money, in any case where:(1) in relation to an activity specified
in CASS 5.2.3 R (1)
(a) to CASS 5.2.3 R (1) (c), the insurance undertaking has agreed that the firm may treat money which
it receives and holds as agent of the undertaking,
as client money and in accordance
with the provisions of CASS
5.3 to CASS
5.6; and(2) the agreement in (1) is in writing
and adequate to show that the insurance
(1) Principle 10 (Clients' assets) requires a firm to arrange adequate protection for clients' assets when the firm is
responsible for them. An essential part of that protection is the proper accounting
and handling of client money.
The rules in CASS 5.1 to CASS
5.6 also give effect to the requirement in article 4.4 of the Insurance
Mediation Directive5 that all necessary measures should
be taken to protect clients against
the inability of an insurance intermediary to
transfer
If a firm holds money as agent of an insurance
undertaking then the firm'sclients (who are not insurance
undertakings) will be adequately protected to the extent that
the premiums which it receives
are treated as being received by the insurance
undertaking when they are received by the agent and claims money and premium refunds
will only be treated as received by the client when
they are actually paid over. The rules in CASS
5.2 make provision for agency agreements between firms
(1) The approach in CASS is to ensure that the rules in a chapter are applied to firms in respect of particular regulated activities or unregulated activities.(2) The scope of the regulated activities to which CASS applies is determined by the description of the activity as it is set out in the Regulated Activities Order. Accordingly, a firm will not generally be subject to CASS in relation to any aspect of its business activities which fall within an exclusion found in the Regulated
(1) A firm which has in its possession or control documents evidencing a client's title
to a contract of insurance or
other similar documents (other
than documents of no value) or which takes into its possession or control
tangible assets belonging to a client,
must take reasonable steps to ensure that any such documents or
items of property:(a) are
kept safe until they are delivered to the client;(b) are
not delivered or given to any other person except
in accordance with instructions
(1) A
firm which holds client money can discharge its obligation
to ensure adequate protection for its clients in
respect of such money by complying
with CASS
5.3 which provides for such money to
be held by the firm on the terms
of a trust imposed by the rules.(2) The
trust imposed by CASS
5.3 is limited to a trust in respect of client money which a firm receives
and holds. The consequential and supplementary requirements in CASS
5.5 are
designed to secure the proper segregation
A firm may
not handle client money in accordance
with the rules in this section
unless each of the following conditions is satisfied:(1) the firm must have and maintain systems and controls
which are adequate to ensure that the firm is
able to monitor and manage its client money transactions
and any credit risk arising from the operation of the trust arrangement and,
if in accordance with CASS 5.4.2 R a firm complies
with both the rules in CASS
5.3 and CASS
5.4, such systems and
(1) The purpose of the precautionary measure rule is to ensure that an incoming EEA firm is subject to the standards of MiFID and the MiFID implementing Directive to the extent that the Home State has not transposed MiFID or the MiFID implementing Directive by 1 November 2007. It is to 'fill a gap'.(2) The rule is made in the light of the duty of the United Kingdom under Article 62 of MiFID to adopt precautionary measures to protect investors. (3) The rule will be effective for