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Background

The FCA’s client money and custody assets rules, known as CASS, have been a particular focus for the regulator since the financial crisis of 2008. The CASS rules are intended to protect client money and custody assets by ensuring they are adequately segregated in the event of a firm’s or its custodian’s failure. 

Firms that fail to comply with the CASS rules, including the rules on reporting, may face enforcement action by the FCA, which could result in fines, restrictions on business activities, or even withdrawal of their permissions. Therefore, it is important for firms that hold client assets to take the CASS rules seriously and ensure that they have robust systems and controls in place to comply with them.

Below is some more information around the key issues related to your CASS arrangements and how we can help. 

What are the key issues and how can we help?

CASS processes and controls

The FCA (and your CASS auditor) expects that all of your CASS processes and controls will be fully documented; we can work with you to design or revise them and this could involve refining your reconciliation processes or record-keeping mechanisms or designing a more efficient CMAR reporting process.

CASS risk and control framework

If you need to have a CASS audit, then the auditor will expect to see a risks and controls matrix; working alongside your team we can check your business against the CASS rules, evaluate the CASS risks you face and document the controls the firm has in place to address them.

CASS policies and procedures

We can draft these from scratch or can update your existing policies and procedures. We can also provide quality assurance input to the drafts you produce.

Governance and oversight

The FCA frequently has concerns that CASS is not given the attention it merits within firms and this can represent a breach of Principle 10 if there is an investigation; we can assess whether your CASS governance and oversight is adequate. This could include a review of management information, breach escalation, CASS committee terms of reference and prescribed responsibilities under SMCR.

CASS audit preparation and assistance

Over recent years, CASS audits have become far more demanding, driven by FCA pressure brought to bear on the external auditors’ professional body. 

If you are expecting a CASS audit, we can help you prepare before the auditor arrives, advise you on findings before the report is finalised or assist you with any remedial work.

You may not be aware that all investment and insurance firms, even those that do not hold client assets, are required to have a CASS audit, and selecting an auditor, particularly for the first time, can be intimidating. Our expert team can help you to select and appoint a CASS auditor suitable for your needs.

CASS health checks

The CASS rules apply at all times, and your standards must remain at the same high level. Whether by carrying out a high-level review of your CASS arrangements or a full review of your processes, our health checks will assess the adequacy of your CASS controls and provide proportionate and effective recommendations for improvements where needed.

CASS training

The FCA rule on employee competence is particularly relevant where clients’ assets are involved. We can provide one-to-one training for senior staff or group training for the whole business.

CASS Resolution Pack preparation and testing

Since 2015, CASS firms have needed a Resolution Pack (RP), which is essential for ensuring the speedy return of client funds in the event of the firm’s insolvency and will be reviewed by your CASS auditor. Whether you need us to create a CASS RP from scratch or to check that your current one is fit for purpose, we can help. 

RegData CMAR (Client Money & Assets Reporting) support

Particularly for small CASS firms, regular CMAR reports   are the FCA’s main line of sight into how they operate. We can review and comment on your CMAR reports before you submit them.

CASS enforcement action case study

Charles Schwab UK Ltd (CSUK) was fined £8.96 million by the FCA in 2020 for failing to appropriately secure customer assets, engaging in regulated activity without authorisation, and making a false statement to the FCA.

Retail clients, who need the highest level of security, were affected. 

CSUK failed to make proper arrangements for the assets of its clients, as it:

•   did not have the right records and accounts to identify its customers’ client assets,
•   did not undertake internal or external reconciliations for its customers’ client assets,
•   did not have adequate organisational arrangements to safeguard client assets, and 
•  did not maintain a resolution pack, which would help to ensure a timely return of client assets in an insolvency

How can we help you?

Thistle Initiatives has supported firms for over 10 years as a trusted compliance and regulatory advisor. In addition to assisting you as-and-when, our team of specialists can serve as your right hand in meeting and complying with regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.

Are you looking for help with your FCA asset management supervision, implementation of the Consumer Duty or more general regulatory questions? Contact our specialist team now to schedule a free consultation.  Get in touch with us by calling 0207 436 0630 or sending an email to info@thistleinitiatives.co.uk.