Client Assets (CASS 10) Manual | Client Money Policy and Procedures | CASS Resolution Pack and Operational Oversight Function | FCA Handbook | Template for FCA Applications and Authorised Firms

1 Client Assets (CASS) Introduction

The CASS Sourcebook is part of the FCA Handbook and applies to all firms who hold or control client money and safe custody assets (client assets). The guidance, rules and requirements set out in CASS have been created to ensure that adequate protections and controls are in place to safeguard client assets should a firm fail or exit the market.

Client Assets is an area of high importance to the FCA, who have made significant changes to this area since taking over the regulatory role. The importance of Client Assets is clear in that one of the FCA’s defining Principles for firms refers to it specifically.

Principle 10 Clients’ Assets – “A firm must arrange adequate protection for clients’ assets when it is responsible for them”.

This manual provides the policies, procedures, measures and controls used by [Your Company Name] (hereinafter referred to as “The Company”) to ensure the security, adequate protections and safeguarding of client money and client assets (referred to collectively in this manual as ‘client assets’, unless otherwise stated). This manual should be used and read in conjunction with our CASS Resolution Pack and associated documentation.

The Company confirms that it has adequate and proportionate systems, procedures and controls in place to ensure the continued safety and security of any client assets held or controlled by the firm and that we comply with all requirements set out in the CASS section of the FCA Handbook.

2 CASS Firm Classification

Under the CASS system, a firm holding or controlling client assets will fall into one of three ‘firm types‘, which are: –

Ensuring that a firm knows which type they are in at any given time is a regulatory requirement and every firm is expected to provide their firm type using the limits laid out in CASS 1A.2.7 (also in the table above) on an annual basis to the FCA. If a firm is near the upper limits of a firm type, they can opt to be classed and treated as being in the next category up, to be compliant throughout the calendar year should they cross into a higher category.

2.1 Current Classification

2.2 Classification Questionnaire & Returns

The Company use automated reminders and a manual calendar provision to ensure that any reports and returns are completed within the regulated timeframes. These are completed by the person holding responsibility for the CASS Oversight Function (CF10a).

Reports and returns completed in relation to CASS are: –

• The CASS classification questionnaire which we complete every year within 15 working days of 31 December, even where we reported a zero balance in the previous calendar year
• Client Money and Asset Return (CMAR) which we complete through GABRIEL (within 15 business days of the end-date of the reporting period) to provide an overview to the FCA of our client money and safe custody assets (client assets) positions and holdings, as well as providing a view of the trends in the industry. (CASS small firms are exempt from submitting the CMAR)

Notifications include, on or before the fifteenth business day of January: –

• Our CASS firm type classification
• Any client money or safe custody assets held by us 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
• Where the Company did not hold client money or safe custody assets in the previous calendar year, but at any point up to the fifteenth business day of January we project that we will do so in the current calendar year, we will provide notification of the highest total amount of client money and the highest total value of safe custody assets that we project we will hold during the current calendar year.

In any other case, we will notify the FCA of the highest total amount of client money and the highest total value of safe custody assets that we project we will hold during the remainder of the current calendar year. This notification will be made no later than the business day before we begin to hold client money or safe custody assets.

For calculating the value of the total amounts of client money and safe custody assets held by us, we use the calculating rules set out in CASS 1A.2.3 and ensure that we: –

• Base our calculation upon internal reconciliations performed during the previous year
• For client money or safe custody assets denominated in a currency other than sterling, we translate the value of that money or that safe custody assets into sterling at the previous day’s closing spot exchange rate
• For safe custody assets only, we calculate their total value using the previous day’s closing mark to market valuation, or if in relation to a particular safe custody asset none is available, the most recent available valuation

We acknowledge that where we are currently classified as a small firm under the CASS rules, but become a medium or large classified firm (holding client money equal to or over £1 million and/or assets equal to or over £10m), we will immediately: –

1. Complete a CMAR through GABRIEL
2. Make a Director or Senior Manager responsible for CASS Oversight (CF10a)

3 CASS Operational Oversight Function

The CASS requirements tie in with the SM&CR, and as such a Senior Manager must be made responsible and accountable for all elements of CASS compliance under the CASS prescribed responsibilities.

This Senior Manager may also perform the CF10a CASS Oversight Function, in which case the Certification Function does not need to be applied to them. However, as the CF10a is usually operationally focused, it is not always assigned to a Senior Manager, in which case the person performing the CASS Oversight Function must be certified by the firm. (Please refer to our SM&CR Policy Pack for further information).

The oversight function for all 3 firm types is similar and most CASS regulatory requirements apply to all firms. The assigned requirements are: –

A CASS small firm must allocate to a single director or senior manager of sufficient skill and authority responsibility for: –

• oversight of the firm’s operational compliance with CASS
• reporting to the firm’s governing body in respect of that oversight
• ensuring their firm complies with its notification requirements under CASS 1A

A CASS medium firm and a CASS large firm must allocate to a single director or senior manager of sufficient skill and authority the function of: –

• overseeing the operational effectiveness of that firm’s systems and controls that are designed to achieve compliance with CASS
• reporting to the firm’s governing body in respect of that oversight
• completing and submitting the Client Money and Asset Return (CMAR) to the FCA in line with the rules set out in SUP 16.14 (where applicable)

In compliance with the requirements set out in CASS 1A.3.3, the responsibility of the CASS Operational Oversight Function within the Company has been allocated to: –

Name: ________________________            Position:          ______________________

Date Allocated: ____________________      Email:              ______________________

In compliance with CASS 1A.3.3, we have the adequate records of the person to whom responsibility has been allocated in accordance with CASS 1A.3.1 R, CASS 1A.3.1A R or CASS 1A.3.1C R (2). These records are retained for 5 years.

3.1 Senior Managers & Certification Regime(SMCR)

As an SMCR firm, the Company understands how the CASS requirements fit into the FCA senior managers and certification regime for SMCR firms. For medium and large CASS firms, we recognise that the function in CASS 1A.3.1AR is not a separate controlled function and performing that function does not require approval as an approved person.

We understand our obligation to allocate the function in CASS 1A.3.1AR to a single director or senior manager of sufficient skill and authority in accordance with CASS 1A.3.1AR and CASS 1A.3.2AR. The Company have a dedicated SMCR program to ensure compliance with the regime and understand our obligations: –

• to allocate certain responsibilities to our SMF managers as per SYSC 24 allocation of prescribed responsibilities
• to ensure that one or more of our SMF managers has overall responsibility for each of our activities, business areas and management functions as per SYSC 26 overall and local responsibility
• under the certification regime as per SYSC 27

[There are slightly different CASS requirements for SMCR firms with regard to obligations under SYSC 24 (prescribed responsibilities) and SYSC 26 (overall responsibility for activities, business areas and management functions). We have added the 3 relevant requirements into individual paragraphs below, so please ensure that you customise/delete as applicable.]

[1] Where the Company has obligations under both SYSC 24 (prescribed responsibilities) and SYSC 26 (overall responsibility for activities, business areas and management functions): –

• We have allocated responsibility for the Company’s compliance with CASS to one of our SMF managers (see our SMCR allocation register) and recognise that it is an FCA-prescribed senior management responsibility
• Whilst the CASS function in SYSC 24.2.1R is different from the function in CASS 1A.3.1AR, we [have/have not] allocated both functions to the same SMF manager to whom the CASS oversight has been allocated
• [Delete if not applicable] We have allocated the CASS FCA-prescribed senior management responsibility to an SMF manager who does not perform any other function coming within the FCA regime for SMF managers in SMCR firms. As such, the allocated SMF Manager is performing an [Other overall responsibility function (SMF18)/Other local responsibility function (SMF22)] as per SUP 10C.7/SUP 10C.8.1R
• Where the Company has chosen to allocate the function in CASS 1A.3.1AR to a person who is not an approved person and SMF manager, we understand that the allocated person will be subject to the employee certification regime as described in SYSC 27 and that they will be subject to supervision by the SMF manager to whom the CASS oversight has been allocated

[2] Where the Company has obligations under SYSC 24 (prescribed responsibilities) but not SYSC 26 (overall responsibility for activities, business areas and management functions): –

• We have allocated responsibility for the Company’s compliance with CASS to one of our SMF managers (see our SMCR allocation register) and recognise that it is an FCA-prescribed senior management responsibility
• Whilst the CASS function in SYSC 24.2.1R is different from the function in CASS 1A.3.1AR, we [have/have not] allocated both functions to the same SMF manager to whom the CASS oversight has been allocated
• Where the Company has chosen to allocate the function in CASS 1A.3.1AR to a person who is not an approved person and SMF manager, we understand that the allocated person will be subject to the employee certification regime as described in SYSC 27 and that they will be subject to supervision by the SMF manager to whom the CASS oversight has been allocated

[3] Where the Company has no obligations under SYSC 24 (prescribed responsibilities) or SYSC 26 (overall responsibility for activities, business areas and management functions); the Company has chosen to [allocate the function in CASS 1A.3.1AR to an SMF manager/allocate the function in CASS 1A.3.1AR to someone who is not an SMF manager].

Where the CASS oversight allocation has been made to someone who is not an SMF manager, we understand that the person performing the function in CASS 1A.3.1AR falls under the certification regime and that the function in CASS 1A.3.1AR is the CASS oversight FCA certification function in SYSC 27.8.1R.

We utilise robust SMF/CF due diligence and fitness assessments to ensure that we are complying with both our SMCR and CASS obligations. Where the Company has allocated the CASS oversight responsibilities to a director or senior manager, we have assessed and verified that no other responsibilities have been allocated to that person unless we are satisfied that: –

• The person will still be able to discharge the CASS oversight responsibilities effectively; and
• our full compliance with CASS will not be compromised

[NOTE: We have created separate policy and procedure documents below for the Client Money and Client Assets requirements to ensure clear and defined measures and controls for both and also for ease of those firms that only one of the CASS 6 or 7 requirements apply.]

4 Client Money Policy & Procedures

5 Client Assets Policy & Procedures

6 Title Transfer Collateral Arrangements

A title transfer collateral arrangements (TTCA) is whereby pre-arrangement, a client transfers full ownership of a safe custody asset or monies to a firm for the purpose of securing or otherwise covering present or future, actual, contingent or prospective obligations.

Where the Company enters into such an arrangement, we assess the firm to ensure that they are not a retail client. Any pre-arrangements for TTCA’s prior to 3rd January 2018 have been terminated.

All TTCA’s are made with a written agreement (in a durable medium) between the client and the Company and are retained for a period of 5 years after the agreement termination date. Each agreement states at a minimum: –

• the terms for the arrangement relating to the transfer of the client’s full ownership of the safe custody asset to the firm
• any terms under which the ownership of the safe custody asset is to transfer from the firm back to the client
• any terms for the termination of the arrangement under or the overall agreement
• the risks involved for the client and the effect of any TTCA on the client’s safe custody assets
• whether all the client’s safe custody assets are made subject to TTCAs, without consideration of what obligation the client has to the Company

The Company keeps documentation of all TTCA’s, noting: –

• the relationship between the client’s obligation to the Company
• the safe custody assets subjected to TTCAs by the Company

6.1 Terminating a TTCA

All notifications from the client regarding the termination of a TTCA are to be made in writing. If for any reason such communication is not in writing, the Company makes a written record of the client’s communication which also records the date the communication was received. The client’s written communication, or a written record is retained for 5 years (from the date received) and is noted on the Company’s Retention Policy & Schedule.

Where the Company agrees to the termination, we contact the client in writing to notify them of our agreement and retain a copy of the written communication on file for 5 years. Such agreement notification states when the termination is to take effect and whether or not the client’s safe custody asset will be held under the custody rules by the Company thereafter.

Any rejection of a client’s termination request is sent in writing to the client along with reasons for the rejection, a copy of which is retained on file for 5 years.

Following a termination of a TTCA, if the Company does not immediately return the safe custody assets to the client, we assess the asset for compliance with the custody rules pursuant to CASS 6.1.1R. If the assets comply with the rules, we will update the registration under CASS 6.2, update our records under CASS 6.6 and treat any shortfall in accordance with CASS 6.6.54 R.

7. Resolution Pack ( CASS RP)

[PLEASE NOTE: We have also provided ready-to-use, unpopulated Resolution Packs in an Excel format. However, it is essential that you review and understand the CASS requirements as they apply to your firms and customise each template/pack to ensure compliance.]

The CASS Resolution Pack is a collection of records and documentation that are required to comply with the FCA’s client assets regulations and rules. Where a firm holds client money and/or safe custody assets, it is obligated to have a resolution pack in place along with a master document that provides easy and quick access to the necessary documents and information.

A CASS Resolution Pack is designed to be a readily available tool that assists the firm, its staff, but has the primary function of being available at the request of the FCA, an Insolvency Practitioner, an administrator, receiver, trustee, liquidator or analogous officer appointed in respect of it, for the purpose of locating and returning client money and safe custody assets should the business fail, and the need arise. CASS regulated firms have a responsibility to their customers at all times to ensure that client money and assets are safe, protected and easily obtainable.

The Company utilise this CASS manual and Resolution Pack to document the controls and measures taken to comply with the legal and regulatory requirements for holding client money and assets with a view to providing prompt retrieval should our firm fail.  CASS 10 requires the development, implementation and use of a CASS Resolution Pack for all firms who: –

• Hold financial instruments, are safeguarding and administering investments, are acting as trustee or depositary of a UCITS; and/or
• Hold client money

7.1 CASS Retrieval Timeframes

The Company acknowledge that the retrieval of all documents required in the CASS Resolution Pack have a maximum timeframe of 48-hours, with some documents being subject to an immediate retrieval rule. Where such documents are retained by a third-party, we have adequate and tested procedures in place to retrieve these documents within the stated timeframes.

Where we hold in electronic form any document in our CASS Resolution Pack, we confirm that we continue to be able to comply with CASS 10.1.7 R and CASS 10.1.11 R in respect of that document.

8 Resolution Pack Word Templates

9 CASS 10 Templates