Client Money Policy and Procedures | CASS Resolution Pack | Acknowledgement Letter | FCA Handbook | Template for FCA Applications and Authorised Firms

1 Purpose

The purpose of the Company’s Client Money Policy and Procedure is to set out our intent and objectives on how we propose to protect and safeguard client money 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 that where we hold or place client money, we have developed and implemented adequate arrangements to safeguard the client’s rights and prevent the use of client money for our own account. Effective and compliant organisational arrangements are in place to minimise the risk of the loss or diminution of client money, or of rights in connection with client money, as a result of misuse of client money, 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 money as set out by the FCA and subsequently in the CASS sourcebook. We are committed to safeguarding and protecting any client money held or controlled by our firm and we have extensive and adequate operational and recording procedures in place to minimise any risks, protect all monies and provide confidence and peace of mind to our clients.

We understand the importance of detailed record keeping with respect to client money, 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 money 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 money
• 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 money
• Have adequate organisational arrangements to minimising the risk of the loss or diminution of client money as a result of misuse of client money against misuse as a result of fraud, poor administration, inadequate record keeping or negligence
• Ensure the segregation of client money and to mark any account used to deposit money as a ‘client bank account’, held and identified separately from any accounts used to hold money belonging to the firm
• Ensure that adequate record keeping procedures are in place to distinguish one clients’ money from that held for any other client and our own firm
• Perform internal reconciliations and records checks
• 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 money 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
• Money arising from, or in connection with, the holding of a safe custody assets by us, which is due to clients is, unless treated otherwise under the client money rules, treated as client money

5 Procedures & Controls

[The procedures in this section follow those set out in the CASS 7 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].

5.1 Client Accounts

The Company has specific client accounts for the holding and placement of client money, details of which are provided under each Appointed Institution in our Resolution Pack.

We only use the designated client account to deposit client money and ensure that these accounts are clearly identifiable from any accounts used to hold money belonging to us.

We comply with the below terms in relation to the client money accounts: –

• The account/s used to deposit client money under CASS 7.13.3 R (1) to CASS 7.13.3 R (3), are designated client bank account/s
• Each client bank account is held on terms under which: –
  • the relevant bank’s contractual counterparty is the Company
  • we are able to make withdrawals of client money promptly and, in any event, within one business day of a request for withdrawal (except where we have agreed terms that comply with CASS 7.13.13 R (3)) (not applicable where we act in the capacity as a trustee firm)

• We may use client bank account/s held on terms under which withdrawals are, without exception, prohibited until the expiry of a fixed term or a notice period of a maximum of 30 days (not applicable where we act in the capacity as a trustee firm)
• Any monies received by our appointed representatives, tied agents, field representatives or other agents is received directly into a client bank account or paid in promptly where receipt is in cash or cheque

The Company ensure that we have signed, completed and returned acknowledgment letters and executed agreements on file for each institution and the all client bank accounts: –

a) Hold the money of one or more clients
b) Are in the name of the firm
c) Includes in their title, an appropriate description to distinguish the money in the account from the firm’s money
d) Is a current or a deposit account; or
e) A money market deposit account of client money which is identified as being client money
f) The designated client bank account is only used for a client where that client has consented to the use of that account and all other designated client fund accounts which may be pooled with it

Notwithstanding the requirement at CASS 7.13.22 R, the Company limits the funds that it deposits or holds with a relevant group entity or combination of such entities, so that the value of those funds does not at any point in time exceed 20 per cent of the total of all the client money held by the Company in our client bank accounts.

5.2 Segregation of Client Money

Although the oversight of CASS lies with the CF10a, the below procedures are carried out by the Accounts Team based on their job roles.

Due diligence checks are carried out prior to using (and as a review on a rolling basis) any of the below for depositing client money with the selection and appropriateness records being recorded and reviewed as per our CASS 10.2 requirements. Procedures in relation to the segregation of client money are: –

• Within 24 hours of receiving any client money, it is deposited into: –
  • a central bank
  • a 3CRD credit institution
  • a bank authorised in a third country
  • a qualifying money market fund (QMFF)
• If money is deposited into a QMFF, the client is notified where the money is held and as a result the money is not held in accordance with the CASS client money rules and will be subject to the custody rules instead
• Client money is deposited into a clearly identified client account which is kept separate from the usual The Company money account
• Where automatic transfers are received, where possible these will be transferred directly into a client bank account
• Where a mixed remittance is received, all funds are to be paid into the client account immediately and then remaining non-client funds are to be transferred back out of the client account within 24 hours.
• When using the ‘normal approach’, all client money we receive is paid directly into a client bank account at an appointed institution rather than being first received into our own account and then segregated
  • Clients and third parties are informed to make transfers and payments of any money which will be client money, directly into our client bank accounts
• [Add/delete as applicable]

[NOTE: We have used the procedures and obligations for the ‘Normal Approach’ to the segregation of client money as required under CASS 7.13.6. If you are required to use the ‘Alternative Approach’ for any transactions, please ensure that you add the procedures.]

5.3 Selection Due Diligence

Where appointing institutions, third parties and/or agents for the placement or holding of client money, the Company carries out adequate and proportionate due diligence and background checks prior to appointment.

All selection and 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 and credit reference checks
• Completing a due diligence review and questionnaire to assess the procedures and controls in place
• Risk assessment

Our records of the grounds upon which we have satisfied ourselves as to the appropriateness of our selection and appointment of a bank or a qualifying money market fund: –

• 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 money
• 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 money

Please refer to our Due Diligence Policy Program for further information on verifications and due diligence checks.

5.4 Qualifying Money Market Funds

Where the Company uses a Qualifying Money Market Fund (QMMF) to hold client money, we understand and ensure that: –

• Our holding of those units in that fund will be subject to any applicable requirements of the custody rules
• We have the permissions required to invest in and hold units in that fund and comply with the rules that are relevant for those activities
• The client is given the right to oppose the placement of their money in a qualifying money market fund
• Where we intend to place client money in a qualifying money market fund and are subject to the requirement to disclose information before providing services, we will notify the client that: –
  • money held for that client will be held in a qualifying money market fund
  • as a result, the money will not be held in accordance with the client money rules
  • if it is the case, that the units will be held as the client’s safe custody assets in accordance with the custody rules

5.5 Physical Receipts of Client Money

Where the Company receives client money in the form of cash, a cheque or other payable order, we always: –

1. Pay the money in promptly, and no later than on the business day after receipt of the money into a client bank account, unless either:
   a. the money is received by a business line for which we use the alternative approach, in which case the money is paid into our own bank account under the same conditions
   b. we are unable to meet the requirement in (1) because of restrictions under the regulatory system or law, in which case the money is paid in as soon as is reasonably possible
2. Ensure the compliance with Principle 10 where we hold any money in the meantime before paying it in, as referred to in (a) or (b) and ensure that the money is held in a safe location
3. Record the receipt of the money in our books and records in line with CASS 7.15 (Records, accounts and reconciliations)

Where we receive client money in the form of a cheque that is post-dated with a future date and that cheque is not returned to the client, we: –

1. Pay the money in promptly, and no later than the date on the cheque if the date is a business day or the next business day after the date on the cheque
2. In the meantime, hold it in a secure location in accordance with Principle 10

Record the receipt of the money in our books and records in accordance with CASS 7.15 (Records, accounts and reconciliations)

5.6 Client Money Receipts and Payments

Any client money received by the Company is allocated to an individual client promptly and, in any case, no later than ten business days following receipt. Pending our allocation of any client money to an individual client, we record the received client money in our books and records as ‘unallocated client money’.

Where we have received money (either in a client bank account or an account of its own) which we are unable to immediately identify as client money or our own money, we always: –

• Take all necessary steps to identify the money as either client money or its own money as soon as possible
• Where reasonably prudent to do so and given the risk that client money may not be adequately protected if it is not treated as such, we treat the entire balance of money as client money and record the money in our books and records as ‘unidentified client money’ while we perform the necessary identification steps
• Where we are unable to make an identification of the money as either our own or client, we take reasonable steps to consider returning the money to the person/institution who sent it

Where we are operating the normal approach to client segregation and are liable to pay money to a client should promptly, we always pay the money: –

• to, or to the order of, the client; or
• into a client bank account

5.7 Client Money Held by a Third Party

Where the Company utilises a third-party (i.e. an exchange, clearing house, intermediate broker) to hold client money, other than under CASS 7.13.3 R, we understand that we still have a fiduciary duty to the client as well as regulatory obligations.

As per compliance with CASS 7.14.2, we only allow another entity/person to hold client money if: –

• We allow that person to hold the client money: –
  • for the purpose of one or more transactions for a client through or with that person
  • to meet a client’s obligation to provide collateral for a transaction
  • in the case of a retail client, that client has been notified that we may allow the other person to hold its client money
• Client money that we allow another person to hold under CASS 7.14.2 R: –
  • Is only held for transactions which are likely to occur (and for which the other person needs to receive client money) or have recently settled (and such that the other person has received client money)
  • Is recorded in client transaction accounts by that other person

5.8 Specific Client Money Rules

[Detail your exact procedures for managing, recording and transferring client money and any other specific CASS 7 procedures that your firm already has in place that differ from those already included.]

6. Records, Accounts, Reconciliations and Reporting

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

Where we establish one or more sub-pools, we read the provisions of CASS 7.15 for records, accounts and reconciliations, as applying separately to our general pool and each sub-pool.

Records are kept that enable us to promptly determine the total amount of client money that we are holding at any one time and to provide specific amounts, balances and transactions relating to each client. The records show and explain all transactions and commitments for our client money and are retained for a period of five years starting from the later of the date it was created or the date it was most recently modified.

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

• Internal custody record checks
• Physical asset reconciliations
• External custody reconciliations
• Internal client money reconciliations
• External client money reconciliations
  • For each client money 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 7.16 onwards.]

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

• Our internal records and accounts of client money are materially out of date, inaccurate or invalid and/or we are no longer able to comply with the requirements in CASS 7.15.2 R, CASS 7.15.3 R or CASS 7.15.5 R (1)
• We will be unable to, or materially fail to, pay any shortfall into a client bank account or withdraw any excess from a client bank account so that we are unable to comply with CASS 7.15.29 R after having carried out an internal client money reconciliation
• We will be unable to, or materially fail to, identify and resolve any discrepancies under CASS 7.15.31 R to CASS 7.15.32 R after having carried out an external client money reconciliation
• We will be unable to, or materially fail to, conduct an internal and/or external client money reconciliation in compliance with the CASS 7 requirements
• We become aware that, at any time in the preceding 12 months, the amount of client money segregated in our client bank accounts materially differ from the total aggregate amount of client money we were required to segregate in client bank accounts under the client money segregation requirements

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.

7. 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

7.1 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 (or appointed person), 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 3^rd 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 3^rd 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

8. 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

We recognise that the main purposes of acknowledgement letters are to: –

• Put the bank, exchange, clearing house, intermediate broker, OTC counterparty or other person (known herein as institution/person) on notice of our clients’ interests in client money that has been deposited with, or has been allowed to be held by, such person
• Ensure that the client bank account or client transaction account has been opened in the correct form and is distinguished from any account containing money that belongs to us
• Ensure that the institution/person understands and agrees that it will not have any recourse or right against money standing to the credit of the client bank account or client transaction account, in respect of any sum owed to such person, or to any other third person, on any other account

8.1 Acknowledgement Letter Procedures

1. For each client bank account, we complete and sign a client bank account acknowledgement letter which clearly identifies the client bank account
2. This is then sent to the bank with whom the client bank account is, or will be, opened
3. We request the bank to acknowledge and agree to the terms of the letter by countersigning it and returning it to the firm
4. A copy of this returned and countersigned acknowledgement letter is then retained in our resolution pack as per 10.2.1 R (5)

We do not hold or receive any client money in or into a client bank account unless we have received a duly countersigned client bank account acknowledgement letter from the relevant bank that has not been inappropriately redrafted and clearly identifies the client bank account.

8.2 Client Transaction Account Acknowledgement Letter Procedures

1. For each client transaction account, we complete and sign a client transaction account acknowledgement letter
2. Clearly identifying on that letter, the client transaction account
3. That letter is then sent to the person with whom the client transaction account is, or will be, opened
4. A request is made for such person to acknowledge and agree to the terms of the letter by countersigning it and returning it to us
5. A copy of this returned and countersigned acknowledgement letter is then retained in our resolution pack

We do not allow the relevant person to hold any client money in a client transaction account maintained by that person for us, unless we have received a duly countersigned client transaction account acknowledgement letter from that person that has not been inappropriately redrafted and that clearly identifies the client transaction account.

8.3 Authorised Central Counterparty Acknowledgment Letter

Where we place client money at an authorised central counterparty in connection with a regulated clearing arrangement must, we: –

1. Complete and sign an authorised central counterparty acknowledgement letter clearly identifying the relevant client transaction account
2. Send that letter to the authorised central counterparty with whom the client transaction account is, or will be, opened
3. A request is made for such authorised central counterparty to acknowledge receipt of the letter by countersigning it and returning it to us
4. A copy of this returned and countersigned acknowledgement letter is then retained in our resolution pack

Where we have complied with CASS 7.18.4 R (1), we allow the authorised central counterparty to hold client money on the relevant client transaction account, whether or not the authorised central counterparty has countersigned and returned the authorised central counterparty acknowledgement letter it received from us.

9. 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 either the role of the Operational Oversight Function (CASS Small Firm), or the Approved Person holding the CF10a CASS Operational Oversight Function (CASS Medium or Large Firms), 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.