Related provisions for CASS 5.6.12
1 - 20 of 54 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 consumer5 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 consumer5and the intermediate broker in relation to the
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 which handles client
money in accordance with the rules for
a non-statutory trust in CASS
5.4 may, to the extent it considers appropriate, but
subject to (2), satisfy the requirement to segregate client
money by segregating or arranging for the segregation of designated investments with a value at least
equivalent to such money as
would otherwise have been segregated into a client
bank account.(2) A firm may not segregate designated
investments unless it:(a) takes
reasonable
(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
A firm must
establish and maintain procedures to ensure that client
money received by its appointed
representatives, field representatives,
or other agents of the firm is:(1) paid
into a client bank account of
the firm in accordance with CASS 5.5.5 R; or(2) forwarded
to the firm, or in the case
of a field representative forwarded
to a specified business address of the firm,
so as to ensure that the money arrives
at the specified business address by the close of the third busi
For the purposes of CASS 5.5.19 R,
the client money received on business day one should be forwarded to the firm or specified business address of the firm no later than the next business day after receipt (business day two) in order for it to reach
that firm or specified business
address by the close of the third business
day. Procedures requiring the client
money to be sent to the firm or
the specified business address of the firm by
first class post no later than the next business
day
If client
money is received in accordance with CASS 5.5.19 R,
the firm must ensure that its appointed representatives, field representatives or other agents keep client money (whether in the form of premiums, claims money or premium refunds) separately identifiable
from any other money (including
that of the firm) until the client money is paid into a client bank account or sent to the firm.
(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
A firm may
allow another person, such as
another broker to hold or control client money,
but only if:(1) the firm transfers the client
money for the purpose of a transaction for a client through
or with that person; and(2) in
the case of a consumer,5 that customer has been notified (whether through
a client agreement,4terms of business, or otherwise in writing)
that the client money may be
transferred to another person.54
A firm may
open one or more client bank accounts in
the form of a designated client bank account.
Characteristics of these accounts are that:(1) the
account holds money of one or
more clients;(2) the
account includes in its title the word 'designated';(3) the clients whose money is
in the account have each consented in writing to the use of the bank with
which the client money is to
be held; and(4) in
the event of the failure of
that bank, the account is not pooled with any other
(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
When considering where to place client money and to determine the frequency
of the appropriateness test under CASS 5.5.43 R, a firm should
consider taking into account, together with any other relevant matters:(1) the
capital of the bank;(2) the
amount of client money placed,
as a proportion of the bank's capital and deposits;(3) the
credit rating of the bank (if available); and(4) to
the extent that the information is available, the level of risk in the investment
and loan activities
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.
When a firm opens
a client bank account, the firm must give or have given written notice
to the bank requesting the bank to acknowledge to it in writing:(1) that
all money standing to the credit
of the account is held by the firm as
trustee (or if relevant in Scotland, as agent) and that the bank is not entitled
to combine the account with any other account or to exercise any right of
set-off or counterclaim against money in
that account in respect of any sum owed to it on any
In the case of a client
bank account in the United
Kingdom, if the bank does not provide the acknowledgement referred
to in CASS 5.5.49 R within 20 business days after
the firm dispatched the notice,
the firm must withdraw all money standing to the credit of the account
and deposit it in a client bank account with
another bank as soon as possible.
A firm must
not undertake any transaction for a consumer5 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 consumer5 (whether in its terms of business, client agreement 4or otherwise in writing):554(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 to be
(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
(1) A firm must, as often as is necessary to ensure
the accuracy of its records and at least at intervals of not more than 25 business days:2(a) check whether its client money resource, as determined by CASS 5.5.65 R on the previous business day,
was at least equal to the client money requirement,
as determined by CASS 5.5.66 R or CASS 5.5.68 R, as at the close of
business on that day; and2(b) ensure that:2(i) any shortfall is
paid into a client bank account by
the close of business
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
If a firm receives
a mixed remittance after a primary pooling event, it must:(1) pay
the full sum into the separate client bank
account opened in accordance with CASS 5.6.9 R;
and (2) pay
the money that is not client money out of that client
bank account into the firm's own
bank account within one business day of
the day on which the remittance
is cleared.
When a bank fails and
the firm decides not to make
good the shortfall in the amount
of client money held at that
bank, a secondary pooling event will
occur in accordance with CASS 5.6.20 R. The firm would
be expected to reflect the shortfall that
arises at the firm's bank in
the periodic client money calculation
by reducing the client money resource
and client money requirement
accordingly.
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.
If a secondary
pooling event occurs as a result of the failure of
a bank where one or more general client bank
accounts are held, then:(1) in
relation to every general client bank account of
the firm, the provisions of CASS 5.6.22 R and CASS 5.6.26 R to CASS 5.6.28 G will apply;(2) in
relation to every designated client bank account held
by the firm with the failed bank, the provisions of CASS 5.6.24 R and CASS 5.6.26 R to CASS 5.6.28 G will apply; and(3) any money held at a
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
If a firm receives
a mixed remittance after the secondary pooling event which consists of client money that would have been paid into
a general client bank account,
a designated client bank account or
a designated client fund account maintained
at the bank that has failed,
it must:(1) pay
the full sum into a client bank account other
than one operated at the bank that has failed;
and(2) pay
the money that is not client money out of that client
bank account within one business
day
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
A CASS large debt management firm internal client money reconciliation requires a CASS large debt management firm to check whether its client money resource, as determined by CASS 11.11.16 R, on the previous business day, was at least equal to the client money requirement, as determined by CASS 11.11.17 R as at the close of business on that day.
(1) The client money requirement is the sum of:(a) the aggregate of all individual client balances calculated in accordance with CASS 11.11.21 R and CASS 11.11.22 R;(b) the amount of any unallocated client money under CASS 11.9.7 R;(c) the amount of any unidentified client money under CASS 11.9.8 R; and(d) any other amounts of client money included in the calculation under (2). (2) For the purposes of (1)(d), the CASS debt management firm must consider whether there are amounts
Firms are reminded that, under CASS 11.4.3 R, if a firm has drawn any cheques, or other payable orders, to discharge its fiduciary duty to its clients (for example, to return client money to the client or distribute it to the client's creditors), the sum concerned must be included in the firm's calculation of its client money requirement until the cheque or order is presented and paid.
The following guidance applies where a CASS debt management firm receives client money in the form of cash, a cheque or other payable order:(1) In carrying out the calculation of the client money requirement, a CASS debt management firm may initially include the amount of client money received as cash, cheques or payment orders that has not yet been deposited in a client bank account in line with CASS 11.9.5 R. If it does so, the firm should ensure, before finalising the calculation,
The individual client balance for each client must be calculated as follows:(1) the amount paid by the client to the CASS debt management firm; plus(2) the amount of any interest, and any other sums, due to the client;less:(3) the aggregate of the amount of money:(a) paid back to that client; and(b) due and payable by the client to the CASS debt management firm; and(c) paid out to a third party for, or on behalf of, that client.
Where the individual client balance calculated in respect of an individual client under CASS 11.11.21 R is a negative figure (because the amounts paid by or due to a client under CASS 11.11.21 R (1) and CASS 11.11.21 R (2) are less than the amounts paid out or due and payable by that client under CASS 11.11.21 R (3), that individual client balance should be treated as zero for the purposes of the calculation of the firm'sclient money requirement in CASS 11.11.17 R.
When a CASS large debt management firm internal client money reconciliation reveals a difference between the client money resource and its client money requirement a CASS large debt management firm must:(1) identify the reason for the difference; (2) ensure that any shortfall in the amount of the client money resource as compared to the amount of the client money requirement is made up by a payment into the firm'sclient bank accounts by the end of the business day following the
While a CASS large debt management firm is unable to resolve a discrepancy arising from the CASS large debt management firm external client money reconciliation, and one record or a set of records examined by the firm during the reconciliation process indicates that there is a need to have greater amount of client money 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
If a primary pooling event occurs, then4:(1) (a) in respect of a sub-pool,4 the following is treated as a single notional pool of client money for the beneficiaries of that pool:45(i) any client money held in a client bank account of the firm relating to that sub-pool; and5(ii) any client money held in a client transaction account of the firm relating to that sub-pool, except for client money held in a client transaction account at an authorised central counterparty3 or a clearing
(-1) 1Each client'sclient equity balance must be reduced by:(a) any amount paid by:3(i) an authorised central counterparty to a clearing member other than the firm in connection with a porting arrangement in accordance with
CASS 7.2.15R (6)
in respect of that client; (ii) a clearing member to another clearing member or firm (other than the firm) in connection with a transfer in accordance CASS 7.2.15R (8);(b) any amount paid by:3(i) an authorised central counterparty directly
If a firm receives a mixed remittance after a primary pooling event, it must:(1) pay the full sum into the separate client bank account opened in accordance with CASS 7A.2.7 R; and(2) pay the money that is not client money out of that client bank account into a firm's own bank account within one business day of the day on which the firm would normally expect the remittance to be cleared.
The requirements imposed on a CASS debt management firm that holds client money vary depending on whether a firm is classified as a CASS small debt management firm or a CASS large debt management firm in CASS 11.2.3 R (CASS debt management firm types). CASS 11.1.4 R to CASS 11.1.6 R indicate which rules in the debt management client money chapter apply to which category of firm.
The debt management client money chapter applies (to the extent indicated by CASS 11.1.4 R to CASS 11.1.6 R) to a CASS debt management firm, even if at the date of the determination or, as the case may be, the notification, referred to in CASS 11.2.4 R, the CASS debt management firm is not holding client money, provided that:(1) it held client money in the previous calendar year; or(2) it projects to hold client money in the current calendar year.
Subject to CASS 11.1.6 R, only the rules and guidance in the debt management client money chapter listed in the table below apply to CASS small debt management firms.
Reference |
Rule |
Application |
|
Firm classification |
|
Responsibility for CASS operational oversight |
|
Definition of client money and discharge of fiduciary duty |
|
Organisational requirements |
|
Statutory trust |
|
Selecting an approved bank at which to hold client money |
|
Client bank account acknowledgement letters |
|
Segregation and the operation of client money accounts |
|
Payments to creditors |
|
CASS 11.11.1 R to CASS 11.11.12 R , CASS 11.11.30 R and CASS 11.11.32 G |
Records, accounts and reconciliations |
CASS 11 resolution pack |
|
Client money distribution in the event of a failure of a firm or approved bank |
(1) An authorised professional firm regulated by the Law Society of England and Wales, the Law Society of Scotland or the Law Society of Northern Ireland that, with respect to its regulated activities, is subject to the following rules of its designated professional body, must comply with those rules and, if it does so, it will be deemed to comply with the debt management client money chapter.(2) The relevant rules are: (a) if the firm is regulated by the Law Society of England
The debt management client money distribution rules seek, in the event of the failure of a CASS debt management firm or of an approved bank at which the CASS debt management firm holds client money, to protect client money and to facilitate the timely payment of sums to creditors or the timely return of client money to clients.
(1) Subject to (2), if a secondary pooling event occurs as a result of the failure of an approved bank where one or more client bank accounts are held then in relation to every client bank account of the firm, the provisions of CASS 11.13.12 R (1), CASS 11.13.12 R (2) and CASS 11.13.12 R (3) will apply.(2) CASS 11.13.12 R does not apply if, on the failure of the approved bank, the CASS debt management firm pays to its clients, or pays into a client bank account at an unaffected
Money held in each 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 client bank accounts, that has arisen as a result of the failure of the approved bank, must be borne by all clients whose client money is held in a client bank account of the firm, rateably in accordance with their entitlements to the pool;(2) a new client money entitlement must be calculated for each client by the firm, to
CASS 11 provides important safeguards for the protection of client money held by CASS debt management firms that sit alongside the fiduciary duty owed by firms in relation to client money. CASS 11.4.2 R to CASS 11.4.4 G provide guidance and rules for when money ceases to be client money for the purposes of both those rules and of the fiduciary duty which CASS debt management firms owe to clients in relation to client money.
Money ceases to be client money if:(1) it is paid to the client, or a duly authorised representative of the client; or(2) it is:(a) paid to a third party on the instruction of the client, or with the specific consent of the client; or(b) paid to a third party further to an obligation on the firm under any applicable law; or(3) it is paid into an account of the client (not being an account which is also in the name of the firm) on the instruction, or with the specific consent,
A firm must include in a statement of client assets referred to under this section the following information:(1) details of all the designated investments or client money held by the firm for the client at the end of the period covered by the statement;(2) the extent to which any clientdesignated investments or client money have been the subject of securities financing transactions; and(3) the extent of any benefit that has accrued to the client by virtue of participation in any
In cases where the portfolio of a client includes the proceeds of one or more unsettled transactions, the information in a statement provided under this section may be based either on the trade date or the settlement date, provided that the same basis is applied consistently to all such information in the statement. [Note: article 43(2) of the MiFID implementing Directive]
1In reporting to a client in accordance with this section, a firm should consider whether to provide details of any assets loaned or charged including:(1) which investments (if any) were at the end of the relevant period loaned to any third party and which investments (if any) were at that date charged to secure borrowings made on behalf of the portfolio; and(2) the aggregate of any interest payments made and income received during the period in respect of loans or borrowings
(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 client
money chapter; or64(b) to
a firm in carrying on an insurance mediation activity which is in
respect of a reinsurance contract;
or(c) to
an insurance undertaking
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
Firms which
carry on designated investment business which
may, for example, involve them handling client
money in respect of life assurance business should refer to the non-directive
client money chapter4 which includes provisions enabling firms to elect to comply solely with that chapter4 or with the insurance
client money chapter4 in respect of that business. Firms that also carry on5MiFID
or equivalent third country business5 may
elect to comply solely with the MiFID client
money
(1) A firm must once every year, and by the time it is required to make a notification in accordance with4CASS 1A.2.9R (4), determine whether it is a CASS large firm, CASS medium firm or a CASS small firm according to the amount of client money or safe custody assets which it holds, using the limits set out in the table in CASS 1A.2.7 R.4(2) For the purpose of determining its ‘CASS firm type’ in accordance with CASS 1A.2.7 R, a firm must:(a) if it currently holds client money
For the purpose of calculating the value of the total amounts of client money and safe custody assets that it holds on any given day during a calendar year a firm must:(1) in complying with CASS 1A.2.2R (2)(a), base its calculation upon internal reconciliations performed during the previous year;(2) in relation to client money or safe custody assets denominated in a currency other than sterling, translate the value of that money or that safe custody assets into sterling at the
CASS firm types
CASS firm type |
Highest total amount of client money held during the firm’s last calendar year or as the case may be that it projects that it will hold during the current calendar year |
Highest total value of safe custody assets held by the firm during the firm's last calendar year or as the case may be that it projects that it will hold during the current calendar year |
more than £1 billion |
more than £100 billion |
|
an amount equal to or greater than £1 million and less than or equal to £1 billion |
an amount equal to or greater than £10 million and less than or equal to £100 billion |
|
less than £1 million |
less than £10 million |
Once every calendar year a firm must notify to the FCA in writing the information specified in (1), (2) or (3) as applicable, and the information specified in (4), in each case no later than the day specified in (1) to (4):44(1) if it held client money or safe custody assets in the previous calendar year, the highest total amount of client money and the highest total value of safe custody assets held during the previous calendar year, notification of which must be made no later
4A firm's 'CASS firm type' and any change to it takes effect:(1) if the firm notifies the FCA in accordance with CASS 1A.2.9 R (1) or CASS 1A.2.9 R (2), on 1 February following the notification; or(2) if the firm notifies the FCA in accordance with CASS 1A.2.9 R (3), on the day it begins to hold client money or safe custody assets; or(3) if the firm makes an election under CASS 1A.2.5 R (1), and provided the conditions in CASS 1A.2.5 R (2) are satisfied, on the day the notification
For each client with a designated client bank account maintained by the firm for the general pool or a particular sub-pool and2 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 of the relevant pool2 whose client money is held in a designated client bank account of the firm at the failed bank, rateably in accordance with
Money held by the firm2 in each designated client fund account for the general pool or a particular sub-pool with the failedbank must be treated as pooled with any other designated client fund accounts for the general pool or a particular sub-pool as the case may be2 which contain part of the same designated fund and:2(1) any shortfall in client money held, or which should have been held, in designated client fund accounts that has arisen as a result of the failure, must be borne
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 , for either the general pool or a particular sub-pool2:(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 relating to the general pool or the particular sub-pool
If a firm receives a mixed remittance after the secondary pooling event which consists of client money that would have been paid into a general client bank account, a designated client bank account or a designated client fund account maintained at the bank that has failed, it must:(1) pay the full sum into a client bank account other than one operated at the bank that has failed; and(2) pay the money that is not client money out of that client bank account within one business
The records maintained under this section, including the sub-pool disclosure documents, are a record of the firm that must be kept in a durable medium for at least five years following the date on which client money was last held by the firm for a sub-pool to which those records or the sub-pool disclosure document applied.
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) Agency
agreements between insurance intermediaries and insurance undertakings may be of a general
kind and facilitate the introduction of business to the insurance
undertaking. Alternatively, an agency agreement may confer on
the intermediary contractual
authority to commit the insurance undertaking to
risk or authority to settle claims or handle premium refunds
(often referred to as "binding authorities"). CASS 5.2.3 R requires
that binding authorities of this kind must
2As a result of CASS 7A.1.1A R, the client money distribution rules relating to primary pooling events and secondary pooling events will not affect any client money held by a firm in its capacity as trustee firm. Instead, the treatment of that client money will be determined by the terms of the relevant instrument of trust or by applicable law. However, the client money distribution rules do apply to a firm for any client money that it holds other than in that capacity which
Where a CASS debt management firm receives client money in the form of cash, a cheque or other payable order, it must:(1) pay the money into a client bank account in accordance with CASS 11.9.1 R promptly and no later than on the business day after it receives the money;(2) if the firm holds the money overnight, hold it in a secure location in line with Principle 10; and(3) record the receipt of the money in the firm's books and records under the applicable requirements of CASS
A CASS debt management firm must ensure that client money received by its appointed representatives, field representatives or other agents is:(1) received directly into a client bank account of the firm; or(2) if it is received in the form of a cheque or other payable order:(a) paid into a client bank account of the CASS debt management firm promptly and, in any event, no later than the next business day after receipt; or(b) forwarded to the firm or, in the case of a field representative,
For the purposes of the CMAR:(1) client money is that to which the client money rules in CASS 7 apply; and(2) safe custody assets are those to which the custody rules in CASS 6 apply4 but only in relation to;6(a) the holding of financial instruments (in the course of MiFID business);6(b) the safeguarding and administration of assets (without arranging) (in the course of business that is not MiFID business);6(c) acting as trustee or depositary of an AIF, and in this case also include
For the avoidance of doubt, the effect of SUP 16.14.4 R is that the following are4 to be excluded from any calculations which the CMAR requires:444(1) any client money held by the firm in accordance with CASS 5;4(2) any safe custody assets in respect of which the firm is merely arranging safeguarding and administration of assets in accordance with CASS 6;46(2A) any safe custody assets for which a small AIFM is: 6(a) carrying on those excluded custody activities that would merely
1A mandate is any means that give a firm the ability to control a client's assets or liabilities, which meet the conditions in (1) to (5): (1) they are obtained by the firm from the client, and with the client's consent;(2) they are in written form at the time they are obtained from the client;(3) they are retained by the firm;(4) they put the firm in a position where it is able to give any or all of the types of instructions described in (a) to (d):(a) instructions to another
The instructions referred to at CASS 8.2.1 R (4) are all instructions given by a firm to another person who also has a relationship with the firm'sclient. For example, the other person may be the client'sbank, intermediary, custodian or credit card provider. This means, for example, that any means by which a firm can control a client's money or assets for which it is itself responsible to the client (rather than any other person) would not amount to a mandate. This includes where
(1) [deleted]77(2) 7[deleted]7(3) [deleted]77(3A) [deleted]77(4) [deleted]77(5) [deleted]525(6) [deleted]77(7) The debt management client money chapter applies to CASS debt management firms receiving or holding client money for, or on behalf of, a client in the course of or in connection with debt management activity.6
7(1) 7A firm must not keep money in respect of which any one of the following chapters applies in the same client bank account or client transaction account as money in respect of which another of the following chapters applies:(a) the client money chapter;(b) the insurance client money chapter;(c) the debt management client money chapter.(2) 7In accordance with CASS 7.1.15H R, a firm which is subject to the client money chapter and holds money both (i) in its capacity as a trustee
The purpose of this chapter1 is to ensure that an appropriate level of protection is provided for those assets over which a client gives a firm certain rights. The arrangements covered by this chapter1 are those under which the firm is given a right to use the asset, and the firm treats the asset as if legal title and associated rights to that asset had been transferred to the firm subject only to an obligation to return equivalent assets to the client upon satisfaction of the
The documents in CASS 11.12.3 R that a CASS debt management firm must include within its CASS 11 resolution pack are:(1) a master document containing information sufficient to retrieve each document in the firm'sCASS 11 resolution pack;(2) a document which identifies all the approved banks with whom client money may be deposited;(3) a document which identifies each appointed representative, field representative or other agent of the firm which may receive client money in its capacity