Related provisions for CASS 7.10.15
1 - 19 of 19 items.
(1) 1Where a client transfers full ownership of money to a firm for the purpose of securing or otherwise covering present or future, actual or contingent or prospective obligations, such money should no longer be regarded as client money.[Note: recital 27 to MiFID](2) Excepted from (1) is a transfer of the full ownership of money:(a) belonging to a retail client; (b) whose purpose is to secure or otherwise cover that client's present or future, actual, contingent or prospective
(1) A firm must ensure that any arrangement relating to the transfer of full ownership of a client'smoney to the firm for the purposes set out in CASS 7.11.1 R (1) and CASS 7.11.2 R (1) is the subject of a written agreement made on a durable medium between the firm and the client.(2) Regardless of the form of the written agreement in (1) (which may have additional commercial purposes), it must cover the client's agreement to:(a) the terms for the arrangement relating to the transfer
Where a firm has received full title or full ownership to money under a collateral arrangement, the fact that it has also granted a security interest to its client to secure its obligation to repay that money to the client would not result in the money being client money. This can be compared to a situation in which a firm takes a charge or other security interest over money held in a client bank account, where that money would still be client money as there would be no absolute
(1) If a client communicates to a firm that it wishes (whether pursuant to a contractual right or otherwise) to terminate an arrangement relating to the transfer of full ownership of its money to the firm for the purposes set out in CASS 7.11.1 R (1) and CASS 7.11.2 R (1), and the client's communication is not in writing, the firm must make a written record of the client's communication, which also records the date the communication was received.(2) A firm must keep a client's
When a firm notifies a client under CASS 7.11.9 R (3)(a) of when the termination of an arrangement relating to the transfer of full ownership of the client's money to the firm is to take effect, it should take into account:(1) any relevant terms relating to such a termination that have been agreed with the client; and(2) the period of time it reasonably requires to return the money to the client, or to update its records under CASS 7.15 (Records, accounts and reconciliations)
(1) Subject to (2)(a)3, money need not be treated as client money:3(a) in respect of a delivery versus payment transaction for the purpose of settling a transaction in relation to units in a regulated collective investment scheme in either of the following circumstances:(i) the authorised fund manager receives the money from a client in relation to the authorised fund manager's obligation to issue units, in an AUT or ACS, or to arrange for the issue of units in an ICVC, in accordance
Money ceases to be client money (having regard to CASS 7.11.40 R where applicable) 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, or with the specific consent of, the client unless it is transferred to a third party in the course of effecting a transaction under CASS 7.14.2 R (Transfer of client money to a third party); or(b) paid to a third party pursuant to an obligation on the
Client money received or held by the firm and transferred to a clearing member who facilitates indirect clearing through a regulated clearing arrangement ceases to be client money for that firm and, if applicable, the clearing member, if the clearing member: (1) remits payment to another firm or to another clearing member in accordance with default management procedures adopted by the clearing member which comply with the requirements of article 4(4) of the EMIR L2 Regulation;
A firm may transfer client money to a third party as part of transferring all or part of its business if, in respect of each client with an interest in the client money that is sought to be transferred, it:(1) obtains the consent or instruction of that client at the time of the transfer of business (see CASS 7.11.34 R (2)(a); or(2) complies with CASS 7.11.42 R (see CASS 7.11.34 R (2)(c); or(3) complies withCASS 7.11.44 R (see CASS 7.11.34 R (2)(d)).
Subject to CASS 7.11.44 R, money ceases to be client money for a firm if:(1) it is transferred by the firm to another person as part of a transfer of business to that person where the client money relates to the business being transferred;(2) it is transferred on terms which require the other person to return a client's transferred sums to the client as soon as practicable at the client's request;(3) a written agreement between the firm and the relevant client provides that:(a)
(1) Client money belonging to those categories of clients set out in (2) and in respect of those amounts set out in (2) ceases to be client money of the firm if it is transferred by the firm to another person:(a) as part of a transfer of business to that other person where these sums relate to the business being transferred; and(b) on terms which require the other person to return a client's transferred sums as soon as practicable at the client's request.(2) (a) For retail clients
Where a firm transfers client money belonging to its clients under either or both of CASS 7.11.42 R and CASS 7.11.44 R it must ensure that those clients are notified no later than seven days after the transfer taking place:(1) whether or not the sums will be held by the person to whom they have been transferred in accordance with the client money rules and if not how the sums being transferred will be held by that person;(2) the extent to which the sums transferred will be protected
A primary pooling event occurs:(1) on the failure of the firm;(2) on the vesting of assets in a trustee2 in accordance with an 'assets requirement' imposed under section 55P(1)(b) or (c) (as the case may be) of the Act;2(3) on the coming into force of a requirement for all client money held by the firm; or(4) when the firm notifies, or is in breach of its duty to notify, the FCA, in accordance with
CASS 7.15.33 R4
(Notification requirements), that it is unable correctly to identify
4If a primary pooling event occurs in circumstances where the firm had, before the primary pooling event, reduced its margined transaction requirement by utilising approved collateral under
CASS 7.16.33 R4
, it must immediately liquidate this approved collateral and place the proceeds in a client bank account .4
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) 1Under EMIR, where a firm that is a
clearing member4
of an authorised central counterparty defaults, the authorised central counterparty may:4(a) portclient positions where possible; and(b) after the completion of the default management process:(i) return any balance due directly to those clients for whom the positions are held, if they are known to the authorised central counterparty; or(ii) remit any balance to the firm for the account of its clients if the clients are
(-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 7.11.34R (6)4
in respect of that client; 4(ii) a clearing member to another clearing member or firm (other than the firm) in connection with a transfer in accordance CASS 7.11.34R (8);44(b) any amount paid by:3(i) an authorised central counterparty directly
If it is prudent to do so to prevent a shortfall in client money on the occurrence of a primary pooling event, a firm may pay money of its own into a client bank account and subsequently retain that money in the client bank account (prudent segregation). Money that the firm retains in a client bank account under this rule is client money for the purposes of the client money rules and the client money distribution rules.
A firm that uses the alternative approach for a particular business line must, on each business day ('T0'):(1) receive any money from and pay any money to (or, in either case, on behalf of) clients into and out of its own bank accounts; (2) perform the necessary reconciliations of records and accounts required under CASS 7.15 (Records, accounts and reconciliations);(3) adjust the balances held in its client bank account (by effecting transfers between its own bank account and
During the period between the adjustment in CASS 7.13.62 R (3) and the completion of the next reconciliations in CASS 7.13.62 R (2), a firm that uses the alternative approach for a particular business line may:(1) increase the balance held in its client bank account by making intra-day transfers (during T0) from its own bank account to its client bank account before the completion of the internal client money reconciliation under CASS 7.13.62 R (2) (that is expected sometime later
(1) A firm that uses the alternative approach must, in addition to CASS 7.13.62 R, pay an amount (determined in accordance with this rule) of its own money into its client bank account and subsequently retain that money in its client bank account (alternative approach mandatory prudent segregation). The amount segregated by a firm in its client bank account under this rule is client money for the purposes of the client money rules and the client money distribution rules.(2) The
(1) If, notwithstanding its reasonable endeavours in accordance with CASS 7.13.71 R, the firm is required under its arrangements with an authorised central counterparty to: (a) receive mixed remittances from the authorised central counterparty5 into a single bank account and pay mixed remittances to the authorised central counterparty from that bank account; or(b) pay mixed remittances to the authorised central counterparty using a single bank account;then such arrangements for
(1) Where the circumstances described in CASS 7.13.72 R (1)(a) apply to a firm it must pay an amount (determined in accordance with this rule) of its own money into its client bank account and retain that money in its client bank account (clearing arrangement mandatory prudent segregation). The amount segregated by a firm in its client bank account under this rule will be client money for the purposes of the client money rules and the client money distribution rules. (2) The amount
A primary
pooling event occurs:(1) on
the failure of the firm; or(2) on
the vesting of assets in a trustee in accordance with an 'assets requirement' imposed under 55P(1)(b) or (c) (as the case may
be) of the Act; or(3) on
the coming into force of a requirement for
all client money held by the firm; or(4) when
the firm notifies, or is in
breach of its duty to notify, the FCA, in accordance with CASS 5.5.77 R1, that it is unable correctly to
identify and allocate in its records
When client
money is transferred to a third party, a firm continues
to owe a fiduciary duty to the client.
However, consistent with a fiduciary's responsibility (whether as agent or
trustee) for third parties under general law, a firm will
not be held responsible for a shortfall in client money caused by a third party failure if it has complied with those duties.
To comply with its duties, the firm should show proper care:(1) in
the selection of a third party; and(2) when
monitoring the performance of the third party.In the case of client
money transferred to a bank, by demonstrating compliance with CASS 5.5.43 R, a firm should be
able to demonstrate that it has taken reasonable steps to comply with its
duties.
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
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) 1Under CASS 7.7.2 R (2), a firm acts as trustee for all client money received or held by it for the benefit of the clients for whom that client money is held, according to their respective interests in it.(2) A firm that is also a clearing member of an authorised central counterparty may wish to segregate client money specifically for the benefit of a group of clients who have chosen to clear positions through a net margined omnibus client account maintained by the firm with
(1) A firm wishing to establish a sub-pool must prepare a sub-pool disclosure document for each sub-pool.(2) The sub-pool disclosure document for each sub-pool must:(a) identify the sub-pool by name, as stated in its records under CASS 7.19.7 R, the net margined omnibus client account and the authorised central counterparty to which the sub-pool disclosure document relates;(b) contain a statement that the client consents to the firm receiving and holding the client'sclient money
(1) A firm must not hold client money for a sub-pool in a client bank account or a client transaction account used for holding client money for any other sub-pool or the general pool.(2) A firm that establishes a sub-pool must ensure that the name of each client bank account and each client transaction account (other than the net margined omnibus client account) maintained for that sub-pool includes a unique identifying reference or descriptor that enables the account to be identified
(1) If a primary pooling event occurs before client money is transferred from a client bank account maintained for the general pool to a client bank account maintained for the appropriate sub-pool in accordance with CASS 7.19.14 R (2), the amount in question will not form part of that sub-pool, including for the purposes of CASS 7A.2.4R (1).(2) If a primary pooling event occurs before client money is transferred from a client bank account maintained for a sub-pool to a client
The FCA would normally consider the dissolution of a sub-pool, such that the firm no longer operates the sub-pool or no longer uses the relevant net margined omnibus client account or transfers the business to another authorised central counterparty, to be examples of material changes to a sub-pool.
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.
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
A primary pooling event occurs:(1) on the failure of a CASS debt management firm;(2) on the vesting of assets in a trustee in accordance with an 'assets requirement' imposed under section 55P(1)(b) or (c) (as the case may be) of the Act where such a requirement is imposed in respect of all client money held by the firm.
Where a primary pooling event1 occurs and the client money is not transferred to another firm in accordance with CASS 11.13.4 R, a CASS debt management firm must distribute client money comprising the notional pool so that each
client2
receives a sum that is rateable to their entitlement to the notional pool calculated in CASS 11.13.4 R (2).22
If in the event of a primary pooling event occurring the debt management activity business undertaken by a CASS debt management firm ("the transferor") is to be transferred to another CASS debt management firm ("the transferee"), then the transferor may also move the client money associated with that business to the transferee.
If there is a shortfall in the client money transferred under CASS 11.13.6 G then the client money must be allocated to each of the clients for whom the client money was held so that each client is allocated a sum which is rateable to that client's client money entitlement in accordance with CASS 11.13.4 R (2). This calculation may be done by either transferor or transferee in accordance with the terms of any transfer.
The transferee must, within seven days after the transfer of client money under CASS 11.13.6 G notify clients that:(1) their money has been transferred to the transferee; and (2) they have the option of having client money returned to them or to their order by the transferee, otherwise the transferee will hold the client money for the clients and conduct debt management activities for those clients.
If client
money is received by the firm in
the form of an automated transfer, the firm must
take reasonable steps to ensure that:(1) the money is received directly into a client bank account; and(2) if money is received directly into the firm's own account, the money is
transferred into a client bank account no
later than the next business day after
receipt.
CASS 5.5.34 R sets
out the requirements a firm must
comply with when it transfers client money to
another person without discharging
its fiduciary duty owed to that client.
Such circumstances arise when, for example, a firm passes client money to another broker for the purposes
of the client's transaction
being effected. A firm can only
discharge itself from its fiduciary duty by acting in accordance with, and
in the circumstances permitted by, CASS 5.5.80 R.
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
(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
If a client has
notified a firm before entering
into a transaction that he does not wish his money to
be passed to another broker or settlement
agent located in a particular jurisdiction, the firm must either:(1) hold
the client money in a client bank account in the United
Kingdom or a jurisdiction to which the money has
not objected and pay its own money to
the firm's own account with
the broker, agent or counterparty; or(2) return
the money to, or to the order
of, the clien
(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
(1) A firm must perform an internal client money reconciliation:(a) each business day; and (b) based on the records of the firm as at the close of business on the previous business day.(2) When performing an internal client money reconciliation, a firm must, subject to (3), follow one of the standard methods of internal client money reconciliation in CASS 7.16.(3) A firm proposing to follow a non-standard method of internal client money reconciliation must comply with the requirements
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 7A.3.6 R. The firm would be expected to reflect the shortfall that arises at the failed bank in the general pool (where the firm maintains only a general pool) and, where relevant, in a particular sub-pool (where the firm maintains both a general pool and one or more sub-pools) 2in its records of the
The client money 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 failed, and who therefore requested that their client money be placed in a designated client bank account at a different bank, should not suffer the loss of the bank that has failed.
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 CRD credit institution or an approved bank that is not a CRD credit institution wishes to hold client money for a client (rather than hold the money in either of the ways described in CASS 7.10.16 R) it must, before providing designated investment business services to the client, disclose the following information to the client:(1) that the money held for that client in the course of or in connection with the business described under (2) is being held by the firm as client
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
This chapter1 recognises the need to apply a differing level of regulatory protection to the assets which form the basis of the two different types of arrangement described in CASS 3.1.5 G. Under the bare security interest arrangement, the asset continues to belong to the client until the firm's right to realise that asset crystallises (that is, on the client's default). But under a "right to use arrangement", the client has transferred to the firm the legal title and associated
(1) 9A firm must ensure that any arrangement relating to the transfer of full ownership of a client'ssafe custody asset to the firm for the purposes set out in CASS 6.1.6R (1) and CASS 6.1.6AR (1) is the subject of a written agreement made on a durable medium between the firm and the client.(2) Regardless of the form of the agreement in (1) (which may have additional commercial purposes), it must cover the client's agreement to: (a) the terms for the arrangement relating to the
If a CASS debt management firm'sclient bank account is transferred to another approved bank, the firm must promptly draw up a new client bank account acknowledgement letter under CASS 11.8.2 R and ensure that the new client bank account acknowledgement letter is duly countersigned and returned by the relevant approved bank within 20 business days of the firm sending it to that person.
Subject to CASS 7.17.3 R in respect of a trustee firm, a firm receives and holds client money as trustee on the following terms:(1) for the purposes of, and on the terms of, the client money rules and the client money distribution rules; (2) (a) where a firm maintains only a general pool of client money, subject to (4), for the clients (other than clients which are insurance undertakings when acting as such with respect to client money received in the course of insurance mediation
(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
A firm must include within its CASS resolution pack:(1) a master document containing information sufficient to retrieve each document in the firm'sCASS resolution pack;(2) a document which identifies the institutions the firm has appointed (including through an appointed representative, tied agent, field representative or other agent):(a) in the case of client money, for the placement of money in accordance with CASS 7.13.3 R1 or to hold client money in accordance with CASS 7.14.2
If a firm'sclient bank account or client transaction account is transferred to another person, the firm must promptly draw up a new acknowledgement letter under CASS 7.18.2 R, CASS 7.18.3 R or CASS 7.18.4 R, as applicable, and, if it is an acknowledgement letter required to be sent under CASS 7.18.2 R or CASS 7.18.3 R, ensure that the new acknowledgement letter is duly countersigned and returned by the relevant person within 20 business days of the firm sending it to that person.