Client Assets Policy and Procedures | Reconciliations and Reporting | CASS Resolution Pack | FCA Handbook | Template for FCA Applications and Authorised Firms

1 Purpose

The purpose of the Company’s Client Assets Policy and Procedure document is to set out our intent and objectives on how we propose to protect and safeguard client assets that the Company either holds or controls and to provide details of the procedures taken to this end along with our CASS Resolution Pack obligations.

This document ensures when holding safe custody assets belonging to clients, we have made the adequate arrangements so as to safeguard clients’ ownership rights, especially in the event of our insolvency, and to prevent the use of safe custody assets belonging to a client on our own account except with the client’s express consent.

Effective and compliant organisational arrangements are in place to minimise the risk of the loss or diminution of clients’ safe custody assets, or the rights in connection with those safe custody assets, as a result of the misuse of the safe custody assets, fraud, poor administration, inadequate record-keeping or negligence. Our controls and measures have been designed to minimise such risks.

2 Policy Statement

The Company takes very seriously its responsibilities towards client assets as set out by the FCA and subsequently in the CASS sourcebook. We are committed to safeguarding and protecting any client assets held or controlled by our firm and we have extensive and adequate operational and recording procedures in place to minimise any risks, protect all assets and provide confidence and peace of mind to our clients.

We understand the importance of detailed record keeping and reconciliations with respect to client assets, so that locating clients and allocating assets is quick and easy should the Company fail and exit the market. We also have comprehensive training programs and staff support materials concerning client assets and the managing, recording, storing and transferring thereof.

3 Scope

The policy applies to all staff (meaning permanent, fixed term, and temporary staff, any third-party representatives or sub-contractors, agency workers, volunteers, interns and agents engaged with The Company in the UK or overseas) within the organisation and has been created to ensure that staff deal with the area that this policy relates to in accordance with legal, regulatory, contractual and business expectations and requirements.

4 Objectives

The Company have developed the below company objectives regarding our CASS requirements, which aim to meet our legal and regulatory obligations and protect both our customers and clients.

The Company aim to: –

• Carry out regular assessments across all CASS related functions and processes to effectively and adequately mitigate risks
• Ensure effective and efficient due diligence is performed on all associated and counterparties prior to making any agreements or forming a business relationship
• Maintain adequate and transparent communications with all CASS associated third parties
• Safeguard and protect client assets
• Appoint an individual the CF10a CASS Oversight Function
• Assign a Senior Manager the CASS Prescribed Responsibility (z)
• Develop and implement policies, procedures and controls for protecting and safeguarding client assets

• Have adequate organisational arrangements to minimising the risk of the loss or diminution of clients’ safe custody assets, or the rights in connection with those safe custody assets, as a result of fraud, poor administration, inadequate record keeping or negligence
• Effect appropriate registration or recording of legal title to a safe custody asset belonging to a client
• Perform internal and external reconciliations and records checks with regards to client assets

• Information clients about how their monies are held and any risks that may be associated with holding or controlling their money
• Ensure that all communications with clients regarding client assets is clear, honest and not misleading
• Ensure that a CASS Resolution Pack and associated procedures are in place and are continuously reviewing for compliance and effectiveness

4 Procedures & Controls

[The procedures in this section follow those set out in the CASS 6 Sourcebook and comply with the general requirements for all firms – however, many CASS controls and procedures are specific to the firm and their processes, so it is essential that you add your own firm’s procedures where applicable and that any CASS requirements not included here, applicable to your firm, are addressed and procedures written in].

4.1 Registration and Recording of Legal Title

The Company effects adequate and appropriate registration or recording of legal title to a safe custody asset belonging to a client in the name of: –

1. The client, unless the client is an authorised person acting on behalf of its client, in which case it may be registered in the name of the client of that authorised person
2. A nominee company which is controlled by: –
   a. the Company
   b. an affiliated company
   c. a recognised investment exchange
   d. a third party with whom financial instruments are deposited under CASS 6.3
3. Any other third party, if the Company is not a trustee firm but are prevented from registering or recording legal title in the way set out in (1) or (2) and provided that: –
   a. the safe custody asset is subject to the law or market practice of a jurisdiction outside the United Kingdom and we have taken reasonable steps to determine that it is in the client’s best interests to register or record it in that way, or that it is not feasible to do otherwise, because of the nature of the applicable law or market practice
4. The Company has notified the client in writing
5. The Company if either: –
   a. we are not a trustee firm but are prevented from registering or recording legal title in the way set out in (1), (2) or (3) and provided that: –
   i. the safe custody asset is subject to the law or market practice of a jurisdiction outside the United Kingdom and the firm has taken reasonable steps to determine that it is in the client’s best interests to register or record it in that way, or that it is not feasible to do otherwise, because of the nature of the applicable law or market practice
   ii. The Company has notified the client if a professional client, or obtained prior written consent if a retail client
   b. The Company is a trustee firm and are prevented from registering or recording legal title in the way set out in (1) or (2)

Under CASS 6.2.3A-1 R, we need not comply with the above conditions as per CASS 6.2.3 R for any safe custody asset: –

• That we have deposited with a third party in accordance with CASS 6.3
• For which, because of the arrangements with that third party for depositing the safe custody asset, it is not practicable for us to effect appropriate registration or recording of legal title itself

We will register or record legal title in our name provided we have notified the client in writing, where: –

• The safe custody asset is an emission auction product that is a financial instrument
• It is not practicable or possible for us to effect registration or recording of legal title in this asset in the manner set out in CASS 6.2.3 R

Where we are not a trustee firm but are prevented from registering or recording legal title in the way set out above in (1) and (2), will are able to demonstrate that adequate investigations have been made of the jurisdiction concerned by reference to local sources, including where applicable, an appropriate legal opinion.

The Company accepts the same level of responsibility to our clients for any nominee company controlled by us, or any nominee company controlled by an affiliated company of ours, with respect of any requirements of the custody rules.

We only register or record legal title to our own applicable asset in the same name as that in which legal title to a client’s safe custody asset is registered or recorded if our applicable asset is separately identified from the client’s safe custody asset in our records, and where either or both conditions in (1) and (2) below are met: –

1. Our holding of our own applicable asset arises incidentally to: –
   a. designated investment business we carry on for the account of any client
   b. steps taken by us to comply with an applicable custody rule
   and, in the case of either (a) or (b), the situation where registration or recording of legal title of our applicable asset is in the same name as the client’s safe custody asset under this rule remains in place only to the extent that it is reasonably necessary
2. The registration or recording of legal title of our own applicable asset in the same name as the client’s safe custody asset is only as a result of the law or market practice of a jurisdiction outside of the United Kingdom

Prior to registering or recording legal title to our own applicable asset in the same name as that in which legal title to a client’s safe custody asset is registered or recorded under CASS 6.2.5 R, we always consider and investigate whether there are any means to avoid doing so.

Any documents that we keep of title to applicable assets in bearer form, belonging to us and which we hold in our physical possession, are kept separately from any document of title to a client’s safe custody assets in bearer form.

4.2 Allocated but Unclaimed Safe Custody Assets

This section sets out the requirements that we must comply with if we choose to divest ourselves of a client’s unclaimed safe custody assets. With regards to unclaimed assets, the Company either: –

1. Liquidates an unclaimed safe custody asset that we hold for a client, at market value, and pay away the proceeds
2. Pays away an unclaimed safe custody asset we hold for a client, in either case, to a registered charity of our choice provided: –
   a. this is permitted by law and consistent with the arrangements under which that safe custody asset is held
   b. we have held that safe custody asset for at least 12 years
   c. in the 12 years preceding the divestment of that safe custody asset, we have not received instructions relating to any safe custody assets from or on behalf of the client concerned
   d. we can demonstrate that we have taken reasonable steps to trace the client concerned and return that safe custody asset

Reasonable steps for tracing and/or locating the client are defined as: –

1. Determining, as far as reasonably possible, the correct contact details for the relevant client
2. Writing to the client at the last known address by post and electronic mail to inform it: –
   a. of the name of the firm with which the client first deposited the safe custody asset in question
   b. of our intention to pay the safe custody asset to charity under CASS 6.2.10 R if we do not receive instructions from the client within 28 days
3. Where the client has not responded after the 28 days referred to in (2) attempting to communicate the information set out in (2) to the client on at least one further occasion by any means other than that used in (2) including by post, electronic mail, telephone or media advertisement
4. Subject to (5) and (6), where the client has not responded within 28 days following the most recent communication, writing again to the client at the last known address either by post or by electronic mail to inform them that:
   a. as we have received no instructions from them, we will, in 28 days’, pay the safe custody asset to charity under CASS 6.2.10 R
   b. an undertaking will be provided by us or a member of our group to pay to the client concerned a sum equal to the value of the safe custody asset at the time it was liquidated or paid away in the event of the client seeking to claim the safe custody asset in future
5. If we have carried out the steps in (2) or (3) and in response has received positive confirmation in writing that the client is no longer at a particular address, we will not use that address for the purposes of (4)
6. If, after carrying out the steps in (1), (2) and (3), we have obtained positive confirmation that none of the contact details we hold for the relevant client are accurate or, if utilised, the communication is unlikely to reach the client, we no longer comply with (4)
7. Waiting a further 28 days following the most recent communication under this rule before divesting ourselves of the safe custody asset under CASS 6.2.10 R

Where we divest ourselves of a client’s safe custody asset under CASS 6.2.10 R, we will comply with either (1)(a) or (1)(b) and, in either case, (2).

1. The Company will: –
   a. unconditionally undertake to pay to the client concerned a sum equal to the value of the safe custody asset at the time it was liquidated or paid away in the event of the client seeking to claim the safe custody asset in future
   b. ensure that an unconditional undertaking in the terms set out in (1)(a) is made by a member of our group and there is suitable information available for relevant clients to identify the member of the group granting the undertaking
2. Any undertaking under this rule is always: –
   a. authorised by our governing body where (1)(a) applies or the governing body of the group member where (1)(b) applies
   b. legally enforceable by any person that had a legally enforceable claim to the unclaimed safe custody asset in question at the time it was divested by us, or by an assign or successor in title to such claim
   c. retained by us, and, where (1)(b) applies, by the group member, indefinitely

Where we pay away a client’s unclaimed safe custody assets to charity or liquidate a client’s unclaimed safe custody assets and pay the proceeds to charity under CASS 6.2.10 R, we make and retain: –

• Records of all safe custody assets divested under CASS 6.2.10 R (including details of the value of each asset at that time and the identity of the client to whom the asset was allocated) indefinitely
• All relevant documentation (including charity receipts)
• Details of the communications we had or attempted to make with the client concerned pursuant to CASS 6.2.10R (4)

Any costs associated with divesting allocated but unclaimed client assets are paid for from our own funds.

4.3 Depositing Safe Custody Assets with Third Parties

Where the Company deposits safe custody assets held by it on behalf of its clients into an account or accounts opened with a third party, we ensure due skill, care and diligence in the selection, appointment and periodic review of the third party and of the arrangements for the holding and safekeeping of those safe custody assets.

In making the selection, appointment and conducting the periodic review referred to under this rule, we will consider: –

• The expertise and market reputation of the third party
• Any legal requirements or market practices related to the holding of those safe custody assets that could adversely affect clients’ rights.

Where appointing third parties for the safeguarding or holding of client assets, the Company carries out adequate and proportionate due diligence and background checks prior to appointment. All selection and ongoing periodic review records are recorded in our Resolution Pack along with records of the grounds on which each third-party was selected. Our checks include: –

• Completing creditworthiness and background checks using company data, incorporation documents, financial statements/resources and credit reference checks
• Completing a due diligence review and questionnaire to assess the procedures and controls in place
• Risk assessments
• Appropriate regulatory permission held by the third party
• Industry standard reports
• Assessing the third party’s performance of its services to the Company
• The arrangements the third party has in place for holding and safeguarding the safe custody asset
• Any other activities undertaken by the third party and, if relevant, any affiliated company

Our records of the grounds upon which we have satisfied ourselves as to the appropriateness of our selection and appointment of the third party: –

• Are documented in our Resolution Pack and on the Master Document
• Record the date the selection or appointment was made
• Are retained that appointment date, until five years after we cease to use that particular person for the purposes of depositing client assets
• Are subject to periodic reviews along with our considerations and conclusions. The review document records the date we complete the review and is retained from that date until five years after the firm ceases to use that particular person for the purposes of depositing client assets

We only deposit safe custody assets with a third party in a jurisdiction which specifically regulates and supervises the safekeeping of safe custody assets for the account of another person with a third party who is subject to such regulation and never deposit safe custody assets held on behalf of a client with a third party in a country that is not an EEA State (third country) and which does not regulate the holding and safekeeping of safe custody assets for the account of another person unless: –

1. The nature of the safe custody assets or of the investment services connected with those safe custody assets requires them to be deposited with a third party in that third country
2. The safe custody assets are held on behalf of a professional client and the client requests the firm in writing to deposit them with a third party in that third country

Adequate, necessary and fully documented steps are in place to ensure that any client’s safe custody assets deposited with a third party are identifiable separately from the applicable assets belonging to us and from the applicable assets belonging to that third party, by means of differently titled accounts on the books of the third party or other equivalent measures that achieve the same level of protection.

4.4 Third-Party Custody Agreements

The Company has written agreements for all third parties with whom we deposit clients’ safe custody assets under CASS 6.3.1 R, or with whom we arrange safeguarding and administration of assets which are clients’ safe custody assets. For the purpose of this document, references to a safe custody asset include any client money derived from that safe custody asset. The agreement/s we have in place: –

• Are recorded in our CASS Resolution Pack and the third party is subject to the selection due diligence and periodic reviews regulations
• Set out the binding terms of the arrangement between us and the third party
• Are in force for the full duration of that arrangement
• Clearly set out the custody service/s that the third party is contracted to provide

We utilise legal and regulatory guidelines and counsel in the development of such agreements and ensure that as a minimum, the following terms are addressed (where applicable): –

• That the title of the account in the third party’s books and records indicates that any safe custody asset credited to it does not belong to the Company
• That the third party will hold or record a safe custody asset belonging to our client separately from any applicable asset belonging to us or to the third party
• The arrangements for registration or recording of the safe custody asset, if this will not be registered in our client’s name
• The restrictions over the circumstances in which the third party may withdraw assets from the account
• The procedures and authorities for the passing of instructions to, or by, the Company
• The procedures for the claiming and receiving of dividends, interest payments and other entitlements accruing to our client
• The provisions detailing the extent of the third party’s liability in the event of the loss of a safe custody asset caused by the fraud, wilful default or negligence of the third party or an agent appointed by them

4.5 Use of Safe Custody Assets

Where the Company use any client’s safe custody assets, we do so only with their prior written consent. This consent is noted on our client listing in our Resolution Pack and includes: –

• Details of each client
• Whether consent has been obtained
• Which client/s has provided consent
• A copy of each written consent letter and/or agreement specifying the terms for use
• The number of safe custody assets used, belonging to each client who has given consent

Where the Company enters into arrangements for securities financing transactions: –

1. In respect of safe custody assets held by us on behalf of a client or otherwise use such safe custody assets for our own account or the account of another client of ours, we only do so where: –
   a. The client has given express prior consent to the use of the safe custody assets on specified terms
   b. The use of that client’s safe custody assets is restricted to the specified terms to which the client consents
2. In respect of safe custody assets held by us on behalf of a client in an omnibus account held by a third party, or otherwise use safe custody assets held in such an account for our own account or for the account of another client, we only do so where the conditions set out above have been met and: –
   a. Each client whose safe custody assets are held together in an omnibus account has given express prior consent as per 1(a)
   b. We have in place systems and controls which ensure that only safe custody assets belonging to clients who have given express prior consent in accordance 1(a) are used

With regards to retail clients, The Company only enters into arrangements under CASS 6.4.1 R to only enter into securities financing transactions and not otherwise use retail client’s safe custody assets. Where obtaining the express prior consent of the retail client under this rule, we ensure that the signature of the retail client or an equivalent alternative mechanism is always obtained and recorded.

When using client’s custody assets, the Company always effects the client’s best interests rule and ensures that use, agreements and communications are open, fairly and professional. For all transactions involving retail clients carried out under the use of safe custody assets regulations and requirements, The Company ensures that: –

• Relevant collateral is provided by the borrower in favour of the client
• The current realisable value of the safe custody asset and of the relevant collateral is monitored daily
• We provide relevant collateral to make up the difference where the current realisable value of the collateral falls below that of the safe custody asset, unless otherwise agreed in writing by the client

4.6 Specific Client Safe Custody Asset Rules

[Detail your exact procedures for managing, recording, depositing and transferring client assets and any other specific CASS 6 procedures that your firm already has in place that differ from those already included.]

5. Records, Accounts, Reconciliations and Reporting

The Company complies with the requirements of keeping records and accounts of the client assets that we use or hold. We have in place adequate and clear controls and procedures necessary to enable us, at any time and without delay, to distinguish client assets held for one client from client assets held for any other client, and from our own assets.

We keep internal records and accounts of clients’ safe custody assets and ensure that these are recorded and kept separate to any records that we have obtained from any third parties (i.e. those with whom we have deposited, or through whom we have registered legal title to, clients’ safe custody assets.) Such records are retained for a period of five years starting from the date it was created or the date it was most recently modified (whichever is the later).

Our Resolution Pack contains direct access to the below required records and reconciliations: –

• Internal custody record checks
• Physical asset reconciliations
• External custody reconciliations

• • For each reconciliation, we detail: –
    • the date we carried out the relevant process
    • the actions taken in carrying out the relevant process
    • the outcome of our calculations, including any discrepancies and the resolving actions taken

[Reconciliations are firm specific, so please ensure that you add your procedures and measures for the frequency and method of the reconciliations, the resolution of reconciliation discrepancies and the frequency of the periodic reviews carried out. Provisions for the methods of reconciliations are provided in the FCA Handbook under CASS 6.6 onwards.]

We understand and comply with our obligations to inform the FCA in writing without delay if: –

• Our internal records and accounts of the safe custody assets held by us for clients are materially out of date, or materially inaccurate or invalid, so that we are no longer able to comply with the requirements in CASS 6.6.2 R to CASS 6.6.4 R
• We are acting as trustee or depositary of an AIF and have not complied with, or are materially unable to comply with, the requirements in CASS 6.6.2 R or in article 89(1)(b) or 89(1)(c) (Safekeeping duties with regard to assets held in custody) of the AIFMD level 2 regulation
• We are acting as trustee or depositary of a UCITS and have not complied with, or is materially unable to comply with, the requirements in CASS 6.6.2R or article 13(1)(b) or 13(1)(c) (Safekeeping duties with regard to assets held in custody) of the UCITS level 2 regulation
• We will be unable, or materially fail: –

• • to take the steps required under CASS 6.6.54 R for the treatment of shortfalls
  • to conduct an internal custody record check in compliance with CASS 6.6.11 R to CASS 6.6.19 R
  • to conduct a physical asset reconciliation in compliance with CASS 6.6.22 R to CASS 6.6.30 R
  • to conduct an external custody reconciliation in compliance with CASS 6.6.34 R to CASS 6.6.37 R

The Company sends an [*quarterly/bi-annual/annual] statement and report of transactions, client money held or deposited and/or client assets hold or used. This statement is sent on [insert date] in writing. Client reports and statements are also sent out at the request of a client at any time.

These are sent in a durable medium and are provided within five business days following the receipt of the request. Where we make a charge for additional statement requests, these only seek to cover our actual costs. All statements are clear, jargon-free and in an easy to understand format.

6. CASS Resolution Pack

We maintain a compliant and current CASS Resolution Pack (RP) at all times, along with a completed master document containing our obligations, retrieval deadlines, latest review date and current document location. The purpose of our RP is to ensure that we have adequate and compliant arrangements in place in the event of business failure and/or to facilitate the FCA, an administrator, receiver, trustee, liquidator or analogous officer appointed in respect of retrieving each document as soon as practicable and, in any event, within 48 hours of that officer’s appointment.

The Company confirms that in relation to each document in the CASS debt management firm’s CASS 11 resolution pack, we ensure that: –

• We have put in place adequate arrangements to ensure that an administrator, receiver, trustee, liquidator or analogous officer appointed in respect of it or any material part of its property is able to retrieve each document as soon as practicable and, in any event, within 48 hours of that officer’s appointment
• The resolution pack contains the documents, information and records specific in CASS 10 and/or CASS 11
• The retrieval of each document can happen as soon as practicable and, in any event, within 48 hours where it has taken a decision to do so or as a result of an FCA request
• We review the content of our CASS resolution pack on an ongoing basis to ensure that it remains accurate and adequate

6.1 CASS Resolution Pack Review

The Company CASS Resolution Pack (RP) is located at [insert location] and contains all documents as specified in CASS 10.2 or 11.12 of the FCA Handbook. To ensure compliance with the regulatory requirements, our CF10a reviews and audits this pack on the [insert day] of each month, as below: –

• Navigate to current location of the CASS Resolution Pack
• Review the master document and ensure that all contents are still adequate, relevant and accurate – make any amendments necessary
• Review list of institutions, custodians and third parties who may or are holding client money or client assets and ensure it is accurate and up to date – make any amendments necessary
• Ensure that any new agreements made since the last review are added to the pack
• Ensure that any new institutions or third parties used since first monthly review are added to the applicable list (including full name, address, contact name, contact number & email address and number of accounts/assets with the firm)
• Review and check the records, reconciliations and reporting documents and requirements
• Complete the review date and sign each section of the RP

7. Acknowledgement Letters, Agreements and Notifications

The Company maintains copies of all acknowledgement letters, agreements, side letters, modifications to terms and notifications as per our CASS requirements. These documents are readily available and adequate to meet our obligations and are stored in our resolution pack.

We have utilised the sample content provided in the FCA handbook Annex to ensure that the content in the letters and any documentation is compliant and effective. Where using the template acknowledgment letter, we: –

• Do not amend any of the acknowledgement letter fixed text
• Ensure the acknowledgement letter variable text is removed, included or amended as appropriate
• Do not amend any of the acknowledgement letter variable text in a way that would alter or otherwise change the meaning of the acknowledgement letter fixed text

8.Responsibilities

The Company will ensure that all staff are provided with the time, training and support to learn, understand and implement the Client Money Policy and Procedures and any related regulatory requirements. All staff are responsible for understanding the obligations under the regulatory system and for ensuring that they know, understand and comply with the Company’s objectives and approach to protecting and handling Client Money.

The allocated individual who has been assigned the role of the CF10a Oversight, has the overall responsibility to ensure that adequate measures, controls and procedures are developed, implemented and disseminated regarding the protection, handling and safeguarding of all client assets and that all requirements set out in the CASS Sourcebook are complied with.