CASS 1
Application and general provisions
CASS 1.1
Application and purpose
- 01/12/2004
Application
- 01/12/2004
Purpose
CASS 1.1.2
See Notes
- 01/12/2004
CASS 1.2
General application: who? what?
- 01/12/2004
General application: who?
CASS 1.2.1
See Notes
- 01/12/2004
CASS 1.2.2
See Notes
CASS applies to every firm, except as provided for in CASS 1.2.3 R, with respect to the carrying on of:
- (1) all regulated activities except to the extent that a provision of CASS provides for a narrower application; and
- (2) unregulated activities to the extent specified in any provision of CASS.
- 01/12/2004
CASS 1.2.3
See Notes
CASS does not apply to:
- (1) an ICVC; or
- (2) an incoming EEA firm other than an insurer, with respect to its passported activities; or
- (3) a UCITS qualifier.
- 01/12/2004
CASS 1.2.4
See Notes
CASS 2 (Custody rules), CASS 3 (Collateral rules) and CASS 4 (Client money and mandates: designated investment business) do not apply to:
- (1) an authorised professional firm with respect to its non-mainstream regulated activities; or
- (2) the Society.
CASS 1.2.5
See Notes
CASS 5 (Client money and mandates: insurance mediation activity) does not apply to an authorised professional firm with respect to its non-mainstream regulated activities, which are insurance mediation activities, if:
CASS 1.2.6
See Notes
- 01/12/2004
General application: what?
CASS 1.2.7
See Notes
- (1) The approach in CASS is to ensure that the rules in a chapter are applied to firms in respect of particular regulated activities or unregulated activities.
- (2) The scope of the regulated activities to which CASS applies is determined by the description of the activity as it is set out in the Regulated Activities Order. Accordingly, a firm will not generally be subject to CASS in relation to any aspect of its business activities which fall within an exclusion found in the Regulated Activities Order. The definition of designated investment business includes, however, activities within the exclusion from dealing in investments as principal in article 15 of the Regulated Activities Order (Absence of holding out etc).
- (3) CASS 2 (Custody rules), CASS 3 (Collateral rules) and CASS 4 (Client money and mandates: designated investment business) apply in relation to regulated activities, conducted by firms, which fall within the definition of designated investment business.
- (4) CASS 5 (Client money and mandates: insurance mediation activity) applies in relation to regulated activities, conducted by firms, which fall within the definition of insurance mediation activities.
Application for private customers, intermediate customers and market counterparties
CASS 1.2.8
See Notes
- (1) CASS applies directly in respect of activities conducted with or for market counterparties as well as with or for customers. The term client refers both to market counterparties and to customers.
- (2) In CASS 2 (Custody rules), CASS 3 (Collateral rules) and CASS 4 (Client money and mandates: designated investment business), the term customer refers to private customers and intermediate customers, but not market counterparties. Where relevant, each of the provisions of CASS makes clear whether it applies to activities carried on with or for private customers, intermediate customers, or both.
- (3) CASS 5 (Client money and mandates: insurance mediation activity) does not generally distinguish between different categories of client. However, the term retail customer is used for those whom additional obligations are owed, rather than the term private customer. This is to be consistent with the client categories used in relation to the obligations in ICOB in relation to insurance mediation activities.
CASS 1.2.9
See Notes
- 01/12/2004
CASS 1.3
General application: where?
- 01/12/2004
CASS 1.3.1
See Notes
- 01/12/2004
UK establishments: general
CASS 1.3.2
See Notes
- 01/12/2004
UK firms: passported activities from EEA branches
CASS 1.3.3
See Notes
- 01/12/2004
CASS 1.4
Application: particular activities
- 01/12/2004
Occupational pension scheme firms (OPS firms)
CASS 1.4.1
See Notes
In the case of OPS activity undertaken by an OPS firm, CASS applies with the following general modifications:
- (1) references to customer are to the OPS or welfare trust, whichever fits the case, in respect of which the OPS firm is acting or intends to act, and with or for the benefit of which the relevant activity is to be carried on; and
- (2) if an OPS firm is required by any rule in CASS to provide information to, or obtain consent from, a customer, that firm must ensure that the information is provided to, or consent obtained from, each of the trustees of the OPS or welfare trust in respect of which that firm is acting, unless the context requires otherwise.
- 01/12/2004
Stock lending activity with or for customers
CASS 1.4.2
See Notes
Corporate finance business
CASS 1.4.3
See Notes
Oil market activity and energy market activity
CASS 1.4.4
See Notes
Appointed representatives
CASS 1.4.5
See Notes
- (1) Although CASS does not apply directly to a firm's appointed representatives, a firm will always be responsible for the acts and omissions of its appointed representatives in carrying on business for which the firm has accepted responsibility (section 39(3) of the Act). In determining whether a firm has complied with any provision of CASS, anything done or omitted by a firm's appointed representative (when acting as such) will be treated as having been done or omitted by the firm (section 39(4) of the Act).
- (2) Firms should also refer to SUP 12 (Appointed representatives), which sets out requirements which apply to firms using appointed representatives.
Depositaries
CASS 1.4.6
See Notes
CASS 1.4.7
See Notes
The remainder of CASS applies to a depositary, when acting as such, with the following general modifications:
- (1) except in CASS 4.5, 'client' means 'trustee', 'trust' or 'collective investment scheme' as appropriate; and
- (2) in CASS 4.5, 'client' means 'trustee' 'collective investment scheme' or 'collective investment scheme instrument' as appropriate.
CASS 1.4.8
See Notes
In relation to a trustee firm which is not a depositary, when acting as such, and which falls within COB 11.5.1 R(1);
CASS 1.5
Application: electronic media and E-Commerce
- 01/12/2004
Application to electronic media and E-Commerce
CASS 1.5.1
See Notes
- 01/12/2004
CASS 1.5.2
See Notes
For any electronic communication with a customer, a firm should:
- (1) have in place appropriate arrangements, including contingency plans, to ensure the secure transmission and receipt of the communication; it should also be able to verify the authenticity and integrity of the communication; the arrangements should be proportionate and take into account the different levels of risk in a firm's business;
- (2) be able to demonstrate that the customer wishes to communicate using this form of media; and
- (3) if entering into an agreement, make it clear to the customer that a contractual relationship is created that has legal consequences.
- 01/12/2004
CASS 1.5.3
See Notes
- 01/12/2004
Modification of CASS resulting from the E-Commerce Directive
CASS 1.5.4
See Notes
- 01/12/2004
CASS 2
Client assets
CASS 2.1
Custody
- 01/12/2004
Application and purpose
CASS 2.1.1
See Notes
CASS 2.1.2
See Notes
- 01/12/2004
CASS 2.1.3
See Notes
- 01/12/2004
CASS 2.1.4
See Notes
CASS 2.1.5
See Notes
In accordance with article 42 of the Regulated Activities Order, a firm ("I") will not be arranging safeguarding and administration of assets if it introduces a client to another firm whose permitted activities include the safeguarding and administration of investments, or to an exempt person acting as such, with a view to that other firm or exempt person:
- (1) providing a safe custody service in the United Kingdom; or
- (2) arranging for the provision of a safe custody service in the United Kingdom by another person;
and the other firm, exempt person or other person who is to provide the safe custody service is not in the same group as I, and does not remunerate I.
- 01/12/2004
CASS 2.1.6
See Notes
- 01/12/2004
CASS 2.1.7
See Notes
- 01/12/2004
CASS 2.1.8
See Notes
- 01/12/2004
CASS 2.1.9
See Notes
The custody rules do not apply to:
- (1) a firm when it safeguards and administers a designated investment on behalf of an affiliated company, unless:
- (a) the firm has been notified that the designated investment belongs to a client of the affiliated company; or
- (b) the affiliated company is a client dealt with at arm's length;
- (2) a firm, when it acts as the operator of a regulated collective investment scheme, in relation to activities carried on for the purpose of, or in connection with, the operation of the scheme;
- (3) a personal investment firm when it temporarily holds a designated investment, other than in bearer form, belonging to a client, if the firm:
- (a) keeps it secure, records it as belonging to that client, and forwards it to the client or in accordance with the client's instructions, as soon as practicable after receiving it;
- (b) retains the designated investment for no longer than the firm has taken reasonable steps to determine is necessary to check for errors and to receive the final document in connection with any series of transactions to which the documents relate; and
- (c) makes a record, which must then be retained for a period of 3 years after the record is made, of all the designated investments handled in accordance with (3)(a) and (b) together with the details of the clients concerned and of any action the firm has taken.
CASS 2.1.10
See Notes
- 01/12/2004
CASS 2.1.11
See Notes
- 01/12/2004
General purpose
CASS 2.1.12
See Notes
- 01/12/2004
Delivery versus payment transactions
CASS 2.1.13
See Notes
A designated investment need not be treated as a safe custody investment in respect of a delivery versus payment transaction through a commercial settlement system if it is intended that the designated investment is either to be:
- (1) in respect of a client's purchase, due to the client within one business day following the client's fulfilment of a payment obligation; or
- (2) in respect of a client's sale, due to the firm within one business day following the fulfilment of a payment obligation;
unless the delivery or payment by the firm does not occur by the close of business on the third business day following the date of payment or delivery of the designated investment by the client.
- 01/12/2004
CASS 2.1.14
See Notes
- 01/12/2004
Modification of scope
CASS 2.1.15
See Notes
- 01/12/2004
Trustees and depositaries
CASS 2.1.16
See Notes
When a trustee firm or depositary acts as a custodian for a trust or collective investment scheme and
- (1) the trust or scheme is established by written instrument; and
- (2) the trustee firm or depositary has taken reasonable steps to determine that the relevant law and provisions of the trust instrument or scheme constitution will provide protections at least equivalent to the custody rules for the trust property or scheme property,
the trustee firm or depositary need comply only with the custody rules listed in CASS 2.1.18 R.
- 01/12/2004
CASS 2.1.17
See Notes
- 01/12/2004
CASS 2.1.18
See Notes
This table belongs to CASS 2.1.16 R.
Reference | Rule |
CASS 2.1.1 R to CASS 2.1.12 G | Application |
CASS 2.1.16 R to CASS 2.1.20 G | Trustees and depositaries |
CASS 2.2.3 R to CASS 2.2.7 R | Segregation |
CASS 2.2.10 R to CASS 2.2.12 G | Registration and recording |
CASS 2.2.15 R (2), CASS 2.2.16 G and CASS 2.2.17 R | Holding |
CASS 2.5.4 R to CASS 2.5.10 R | Stocklending |
CASS 2.6.2 R to CASS 2.6.14 R | Reconciliation |
CASS 2.6.15 R to CASS 2.6.16 R | Records |
- 01/12/2004
CASS 2.1.19
See Notes
- 01/12/2004
CASS 2.1.20
See Notes
- 01/12/2004
Arrangers
CASS 2.1.21
See Notes
- 01/12/2004
CASS 2.1.22
See Notes
This table belongs to CASS 2.1.21 R.
Reference | Rule |
CASS 2.1.1 R to CASS 2.1.12 G | Application |
CASS 2.1.21 R to CASS 2.1.22 R | Arrangers |
CASS 2.2.18 R, CASS 2.2.21 G to CASS 2.2.22 G | Assessment of custodian |
CASS 2.3.7 R to CASS 2.3.9 G | Risk disclosures |
CASS 2.6.15 R | Records |
- 01/12/2004
Depositary receipt business
CASS 2.1.23
See Notes
- 01/12/2004
CASS 2.1.24
See Notes
- 01/12/2004
CASS 2.1.25
See Notes
This table belongs to CASS 2.1.24 R.
Reference | Rule |
CASS 2.2.8 R | Segregation |
CASS 2.2.23 R | Assessment of custodian |
CASS 2.3.2 R to CASS 2.3.5 R | Client agreement |
CASS 2.3.7 R to CASS 2.3.9 G | Risk disclosures |
CASS 2.3.12 R to CASS 2.3.16 R | Production and despatch of statements |
CASS 2.3.17 R to CASS 2.3.21 R | Content of client statements |
- 01/12/2004
CASS 2.1.26
See Notes
- 01/12/2004
CASS 2.2
Segregation, registration and recording, and holding
- 01/12/2004
Application
CASS 2.2.2
See Notes
- 01/12/2004
General
CASS 2.2.3
See Notes
- 01/12/2004
CASS 2.2.4
See Notes
- 01/12/2004
CASS 2.2.5
See Notes
- 01/12/2004
CASS 2.2.6
See Notes
- 01/12/2004
CASS 2.2.7
See Notes
- 01/12/2004
Affiliated companies
CASS 2.2.8
See Notes
- 01/12/2004
Registration and recording: purpose
CASS 2.2.9
See Notes
- 01/12/2004
CASS 2.2.10
See Notes
To the extent practicable, a firm must effect appropriate registration or recording of legal title to a safe custody investment in the name of:
- (1) the client (or where appropriate, the trustee firm), 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 firm;
- (b) an affiliated company;
- (c) a recognised investment exchange or designated investment exchange;
- (d) a custodian;
- (3) a custodian if:
- (a) the safe custody investment 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; and
- (b) the firm has notified the client in writing;
- (4) the firm if:
- (a) the safe custody investment 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; and
- (b) the firm has notified the client in accordance with CASS 2.3.10 R (Risk disclosures) if a market counterparty or an intermediate customer, or obtained his prior written consent if a private customer; or
- (5) any other person, in accordance with the client's specific written instruction, provided:
- (a) the firm complies with CASS 2.3.11 R (Risk disclosures); and
- (b) in the case of a private customer, the other person is not an associate of the firm.
CASS 2.2.11
See Notes
- 01/12/2004
CASS 2.2.12
See Notes
- 01/12/2004
CASS 2.2.13
See Notes
A firm may register or record legal title to its own designated investment in the same name as that in which legal title to a safe custody investment is registered or recorded, but only if:
- (1) the firm's designated investments are separately identified in the firm's records from safe custody investment; or
- (2) the firm registers or records a safe custody investment in accordance with CASS 2.2.10 R(4).
- 01/12/2004
Holding: purpose
CASS 2.2.14
See Notes
- 01/12/2004
CASS 2.2.15
See Notes
A firm must hold any document of title to a safe custody investment either in the physical possession of the firm or:
- (1) for a private customer, with a custodian in an account designated for clients' safe custody investments;
- (2) for a market counterparty or intermediate customer, with one or more of the following:
- (a) a custodian in an account designated for clients' safe custody investment;
- (b) any person whom the firm has taken reasonable steps to determine is a person whose business includes the provision of appropriate safe custody services; or
- (c) subject to CASS 2.3.11 R (Risk disclosures) in accordance with the market counterparty's or intermediate customer's specific written instructions.
CASS 2.2.16
See Notes
- 01/12/2004
CASS 2.2.17
See Notes
- 01/12/2004
Assessment of a custodian
CASS 2.2.18
See Notes
- 01/12/2004
CASS 2.2.19
See Notes
CASS 2.2.20
See Notes
CASS 2.2.21
See Notes
In undertaking an appropriate risk assessment of the custodian in accordance with CASS 2.2.18 R and CASS 2.2.19 R, firms might take into account any or all of the following matters:
- (1) the expertise and market reputation of the custodian, and, once a safe custody investment has been lodged by the firm with the custodian, the custodian's performance of its services to the firm;
- (2) the arrangements for holding and safeguarding an investment;
- (3) an appropriate legal opinion as to the protection of custody assets in the event of the insolvency of the custodian;
- (4) current industry standard reports, for example Financial reporting and auditing group (FRAG) 21 report or its equivalent;
- (5) whether the custodian is regulated and by whom;
- (6) the capital or financial resources of the custodian;
- (7) the credit rating of the custodian;
- (8) any other activities undertaken by the custodian and, if relevant, any affiliated company.
- 01/12/2004
CASS 2.2.22
See Notes
- 01/12/2004
CASS 2.2.23
See Notes
- 01/12/2004
CASS 2.3
Client agreement and client statements
- 01/12/2004
Application
CASS 2.3.2
See Notes
Before a firm provides safe custody services to a client, unless CASS 2.3.5 R applies, the firm must notify the client as to the appropriate terms and conditions which apply to this service, including, where applicable, those covering:
- (1) registration of the safe custody investments if these will not be registered in the client's name;
- (2) the extent of the firm's liability in the event of a default by a custodian, except that a firm must accept the same level of responsibility to its client for any nominee company controlled by the firm or by its affiliated company as for itself and may not disclaim responsibility for losses arising directly from the fraud, wilful default or negligence of the firm;
- (3) the circumstances in which the firm may realise a safe custody investment held as collateral to meet the client's liabilities (see COB 7.8) (Realisation of a private customer's assets).
- (4) claiming and receiving dividends, interest payments and other entitlements accruing to the client;
- (5) dealing with takeovers, other offers or capital reorganisations and exercising voting, conversion and subscription rights;
- (6) arrangements for the distribution of entitlements to shares and any other benefits arising from corporate events, where clients' balances have been pooled;
- (7) arrangements for the provision of information to the client relating to the safe custody investment which the firm, or its nominee company, holds on behalf of the client;
- (8) how often a statement of custody assets will be sent to the client and the basis on which assets shown on the statement are valued;
- (9) fees and costs for safe custody services to the extent that they are not notified to the client elsewhere; and
- (10) if the firm intends to pool a safe custody investment with that of one or more other clients, notification of its intention to the market counterparty or intermediate customer and if the client is a private customer, an explanation of the effects of pooling to that private customer.
CASS 2.3.3
See Notes
When explaining the meaning of pooling to a private customer, firms are expected to advise the private customer that:
- (1) individual entitlements may not be identifiable by separate certificates, other physical documents or equivalent electronic record; and
- (2) in the event of an unreconcilable shortfall after the failure of a custodian, clients may share in that shortfall in proportion to their original share of the assets in the pool.
CASS 2.3.4
See Notes
Unless CASS 2.3.5 R or CASS 2.3.6 R applies, the firm must obtain the written agreement of a private customer, or notify a market counterparty or an intermediate customer, as to:
- (1) the arrangements for the giving and receiving of instructions by or on behalf of the client in respect of the safe custody service which is to be provided, including, if applicable, the arrangements for the giving of authority by the client to another person and the extent of that authority and any limitation on it; and
- (2) any lien or security interest taken over a safe custody investment by the firm or a third party, except in respect of any charges relating to the administration or safekeeping of the safe custody investments;
CASS 2.3.5
See Notes
- 01/12/2004
CASS 2.3.6
See Notes
- (1) A firm need not obtain the written agreement of a private customer, or give notice to a market counterparty or an intermediate customer, as required by CASS 2.3.4 R if:
- (a) the client is ordinarily resident outside the United Kingdom;
- (b) the firm has taken reasonable steps to determine that the client does not wish to execute that agreement; and
- (c) the firm makes and retains a record of those steps and their results.
- (2) For a firm acting as an outgoing ECA provider, the exemption in (1) applies only if the client is ordinarily resident outside the EEA.
Risk disclosures
CASS 2.3.7
See Notes
- 01/12/2004
CASS 2.3.8
See Notes
CASS 2.3.9
See Notes
- 01/12/2004
CASS 2.3.10
See Notes
Before a firm registers or records legal title to a safe custody investment in the name of the firm, it must notify the client if a market counterparty or an intermediate customer, and obtain his prior written consent if the client is a private customer, that:
- (1) the safe custody investment will or may be registered or recorded in the firm's name;
- (2) as a result the safe custody investment may not be segregated from the designated investments of the firm; and
- (3) in the event of the failure of the firm, the client's assets may not be as well protected from claims made on behalf of the general creditors of the firm.
CASS 2.3.11
See Notes
- 01/12/2004
Production and despatch of client statements
CASS 2.3.12
See Notes
A firm must, as often as necessary or as often as agreed with its client, but in any event not less frequently than annually, provide to each client, or to a representative nominated by the client in writing, a statement prepared in accordance with CASS 2.3.17 R (Content of client statements) unless:
- (1) the account of a client for whom a custody asset has been held at any time during the firm's financial year has been closed; and
- (2) the firm has sent the client a closing statement which shows that the firm no longer holds any custody asset for the client.
- 01/12/2004
CASS 2.3.13
See Notes
- 01/12/2004
CASS 2.3.14
See Notes
- (1) A firm may, with the client's prior written agreement, retain statements required to be sent to a client who is ordinarily resident outside the United Kingdom.
- (2) For a firm acting as an outgoing ECA provider, the exemption in (1) applies only if the client is ordinarily resident outside the EEA.
- 01/12/2004
CASS 2.3.15
See Notes
- 01/12/2004
CASS 2.3.16
See Notes
Content of client statements
CASS 2.3.17
See Notes
All statements produced by or on behalf of a firm in accordance with CASS 2.3.12 R - CASS 2.3.14 R and CASS 2.3.16 R, must list all custody assets held for the client for which the firm is accountable and:
- (1) identify any safe custody investment registered in the client's own name separately from those registered in any other name;
- (2) identify any custody assets which are being used as collateral or have been pledged to third parties, separately from any other custody assets;
- (3) show the market value of any collateral held, as at the date of the statement; and
- (4) for a private customer, base the statement on either trade date or settlement date information for cash balances and safe custody investment and notify the basis to the private customer.
CASS 2.3.18
See Notes
CASS 2.3.19
See Notes
- 01/12/2004
CASS 2.3.20
See Notes
- 01/12/2004
CASS 2.3.21
See Notes
- 01/12/2004
CASS 2.4
Custodian agreement
- 01/12/2004
Application
CASS 2.4.2
See Notes
Before a firm holds a safe custody investment for or on behalf of a client with a custodian, it must agree in writing appropriate terms and conditions with the custodian, including, where applicable:
- (1) that the title of the account indicates that any safe custody investment credited to it does not belong to the firm or to an affiliated company that is not being treated as an arm's length client in accordance with CASS 2.1.9 R(1)(b) (Application));
- (2) that the custodian will hold or record a safe custody investment belonging to the firm's client (or where the firm is a trustee firm, the trustees), separately from any designated investment belonging to the firm or to the custodian;
- (3) that the custodian will deliver to the firm a statement as at a date or dates specified by the firm which details the description and amounts of all the safe custody investments credited to the account;
- (4) that the custodian will not claim any lien, right of retention or sale over any safe custody investment standing to the credit of any account set up in accordance with (1) except:
- (a) where the firm has notified the custodian in writing that the client has provided written consent; or
- (b) in respect of any charges relating to the administration or safekeeping of the safe custody investment;
- (5) the arrangements for registration or recording of the safe custody investment if this will not be registered in the client's name;
- (6) that the custodian is not to permit withdrawal of any safe custody investment from the account except for delivery to the firm or on the firm's instructions;
- (7) the procedures and authorities for the passing of instructions to or by the firm;
- (8) the claiming and receiving of dividends, interest payments and other entitlements accruing to the client; and
- (9) the extent of the custodian's liability in the event of the loss of a safe custody investment caused by the fraud, wilful default or negligence of the custodian, or an agent appointed by him.
- 01/12/2004
CASS 2.4.3
See Notes
- 01/12/2004
CASS 2.4.4
See Notes
- 01/12/2004
CASS 2.5
Use of a safe custody investment and stock lending
- 01/12/2004
Application
CASS 2.5.2
See Notes
A firm must not use a safe custody investment for its own account unless the client:
- (1) if a private customer, has given prior written consent to the firm; or
- (2) if an intermediate customer or market counterparty, has been notified by the firm.
Use of a safe custody investment: by another client
CASS 2.5.3
See Notes
A firm must not use, for the account of one client, the safe custody investment of any other customer, unless that other customer:
- (1) if a private customer, has given prior written consent to the firm; or
- (2) if an intermediate customer, has been notified by the firm.
Stock lending
CASS 2.5.4
See Notes
A firm must not undertake or otherwise engage in stock lending activity with or for a customer unless:
- (1) the firm has obtained the consent of the customer; and
- (2) the stock lending activity is subject to appropriate terms and conditions.
CASS 2.5.5
See Notes
- (1) In the case of a private customer, the appropriate terms and conditions referred to in CASS 2.5.4 R(2) include those specified in COB 4 Annex 2(18) (Content of terms of business provided to a customer: stock lending).
- (2) Compliance with (1) may be relied upon as tending to establish compliance with CASS 2.5.4 R(2).
- (3) Contravention of (1) may be relied upon as tending to establish contravention of with CASS 2.5.4 R(2).
- 01/12/2004
CASS 2.5.6
See Notes
CASS 2.5.7
See Notes
- 01/12/2004
CASS 2.5.8
See Notes
If a safe custody investment belonging to a private customer is used for stock lending activity, the firm must ensure that:
- (1) relevant collateral is provided by the borrower in favour of the customer;
- (2) the current realisable value of the safe custody investment and of the relevant collateral is monitored daily; and
- (3) the firm provides relevant collateral to make up the difference where the current realisable value of the collateral falls below that of the safe custody investment, unless otherwise agreed in writing by the customer.
CASS 2.5.9
See Notes
If safe custody investments of more than one customer are registered or otherwise held together, none of those safe custody investments may be used for a stock lending activity unless:
- (1) all of those customers have consented to their safe custody investments being used for that activity; or
- (2) the firm has adequate systems and procedures in place to ensure that only safe custody investments belonging to customers who have given their consent are used for stock lending activity.
- 01/12/2004
CASS 2.5.10
See Notes
- 01/12/2004
CASS 2.5.11
See Notes
CASS 2.5.12
See Notes
- 01/12/2004
CASS 2.5.13
See Notes
- 01/12/2004
CASS 2.5.14
See Notes
- 01/12/2004
CASS 2.6
Operation
- 01/12/2004
Application
CASS 2.6.2
See Notes
- 01/12/2004
CASS 2.6.3
See Notes
- 01/12/2004
CASS 2.6.4
See Notes
- 01/12/2004
CASS 2.6.5
See Notes
- 01/12/2004
CASS 2.6.6
See Notes
A firm must, as often as is necessary, but no less than every 6 months (or twice in a period of 12 months but at least 5 months apart), carry out:
- (1) a count of all safe custody investments it physically holds on behalf of clients and reconcile the result of that count with its record of safe custody investments that it physically holds on behalf of its clients; and
- (2) a reconciliation between the firm's record of client holdings, and the firm's record of the location of safe custody investments.
- 01/12/2004
CASS 2.6.7
See Notes
- 01/12/2004
CASS 2.6.8
See Notes
- 01/12/2004
CASS 2.6.9
See Notes
- 01/12/2004
Reconciliation methods
CASS 2.6.10
See Notes
The reconciliation referred to in CASS 2.6.6 R must cover all safe custody investments recorded in the firm's books and records and those of any nominee company which the firm uses for the provision of safe custody services and is controlled by the firm or by an affiliated company, and must be performed by:
- (1) the 'total count method', which requires that all safe custody investments be counted and reconciled as at the same date; or
- (2) an alternative reconciliation method (for example the rolling stock method) provided that:
- (a) all of a particular safe custody investment are counted and reconciled as at the same date;
- (b) all safe custody investments are counted and reconciled during a period of six months; and
- (c) written confirmation is given to the FSA from the firm's auditor that the firm has in place systems and controls which enable it to adequately perform the alternative method of reconciliation which the firm proposes to use.
- 01/12/2004
Reconciliation discrepancies
CASS 2.6.11
See Notes
- 01/12/2004
CASS 2.6.12
See Notes
- 01/12/2004
CASS 2.6.13
See Notes
- 01/12/2004
Notification requirement
CASS 2.6.14
See Notes
A firm must inform the FSA in writing without delay:
- (1) if it has not complied with, or is unable, in any material respect, to comply with the reconciliation requirements in CASS 2.6.2 R, CASS 2.6.4 R, CASS 2.6.6 R, CASS 2.6.8 R and CASS 2.6.10 R; or
- (2) if having carried out a reconciliation it is unable, in any material respect, to comply with CASS 2.6.11 R.
- 01/12/2004
Records
CASS 2.6.15
See Notes
- 01/12/2004
CASS 2.6.16
See Notes
- 01/12/2004
CASS 3
Collateral
CASS 3.1
Application and Purpose
- 01/12/2004
Application
CASS 3.1.1
See Notes
CASS 3.1.2
See Notes
CASS 3.1.3
See Notes
CASS 3.1.4
See Notes
Purpose
CASS 3.1.5
See Notes
CASS 3.1.6
See Notes
CASS 3.1.7
See Notes
CASS 3.2
Requirements
- 01/12/2004
Application
CASS 3.2.2
See Notes
CASS 3.2.3
See Notes
- 01/12/2004
CASS 3.2.4
See Notes
CASS 4
Client
money and mandates: designated investment business
CASS 4.1
Application and Purpose
- 01/12/2004
Application
CASS 4.1.1
See Notes
This section (the client money rules) applies to a firm that receives or holds money from, or on behalf of, a client in the course of, or in connection with:
- (1) its designated investment business; or
- (2) in the circumstances set out in CASS 4.1.1A R, insurance mediation activity;
except where CASS 4.1.2 R applies.
CASS 4.1.1A
See Notes
CASS 4.1.2
See Notes
The client money rules do not apply with respect to:
- (1) the permitted activities of a long-term insurer or a friendly society; or
- (2) coins held on behalf of a client if the firm and the client have agreed that the money (or money of that type) is to be held by the firm for the intrinsic value of the metal which constitutes the coin; or
- (3) money held by a firm which is an approved bank, but only when held in an account with itself, in which case the firm must notify the client in writing that:
- (a) money held for that client in an account with the approved bank will be held by the firm as banker and not as trustee (or in Scotland as agent); and
- (b) as a result, the money will not be held in accordance with the client money rules;
- (4) money held by depositaries which are regulated by COB 11;
- (5) client money held by a firm which:
- (a) receives or holds client money in relation to contracts of insurance; but which
- (b) in relation to such client money elects to act in accordance with CASS 5.1 to 5.6.
CASS 4.1.2A
See Notes
- 01/12/2004
CASS 4.1.2B
See Notes
- (1) A firm which receives and holds client money in respect of life assurance business in the course of its designated investment business may:
- (a) in accordance with CASS 4.1.1A R elect to comply with CASS 4 in respect of such client money and in doing so avoid the need to comply with CASS 5.1 to 5.6 which would otherwise apply to the firm in respect of client money received in the course of its insurance mediation activity; or
- (b) in accordance with CASS 4.1.2 R (5), elect to comply with CASS 5.1 to 5.6 in respect of such client money.
- (2) These options are available to a firm irrespective of whether it also receives and holds client money in respect of other parts of its designated investment business. A firm may not however choose to comply with CASS 5.1 to 5.6 in respect of client money which it receives and holds in the course of any part of its designated investment business which does not involve an insurance mediation activity.
CASS 4.1.3
See Notes
- 01/12/2004
CASS 4.1.4
See Notes
- 01/12/2004
CASS 4.1.5
See Notes
- 01/12/2004
CASS 4.1.6
See Notes
- 01/12/2004
General purpose
CASS 4.1.7
See Notes
- 01/12/2004
Money that is not client money: 'opt outs' for any business (including ISD business) other than insurance mediation activity
CASS 4.1.8
See Notes
CASS 4.1.9
See Notes
Subject to CASS 4.1.11 R, money is not client money when a firm (other than a sole trader) holds that money on behalf of, or receives it from, a market counterparty or an intermediate customer, other than in the course of insurance mediation activity, and the firm has obtained written acknowledgement from the market counterparty or intermediate customer that:
- (1) the money will not be subject to the protections conferred by the client money rules;
- (2) as a consequence, this money will not be segregated from the money of the firm in accordance with the client money rules and will be used by the firm in the course of its own business; and
- (3) the market counterparty or intermediate customer will rank only as a general creditor of the firm.
'Opt-outs' for non-ISD or non-IMD business
CASS 4.1.10
See Notes
CASS 4.1.11
See Notes
Money is not client money if a firm, in respect of designated investment business which is not a core investment service, a non-core investment service, a listed activity or insurance mediation activity:
- (1) holds it on behalf of or receives it from a market counterparty who is not an authorised person or an intermediate customer who is not an authorised person; and
- (2) has sent a separate written notice stating the matters set out in CASS 4.1.9 R (1) to (3).
CASS 4.1.12
See Notes
CASS 4.1.13
See Notes
- 01/12/2004
CASS 4.1.14
See Notes
- 01/12/2004
Money in connection with a "delivery versus payment" transaction
CASS 4.1.15
See Notes
Money need not be treated as client money in respect of a delivery versus payment transaction through a commercial settlement system if it is intended that either:
- (1) in respect of a client's purchase, money from a client will be due to the firm within one business day upon the fulfilment of a delivery obligation; or
- (2) in respect of a client's sale, money is due to the client within one business day following the client's fulfilment of a delivery obligation;
unless the delivery or payment by the firm does not occur by the close of business on the third business day following the date of payment or delivery of the investments by the client.
- 01/12/2004
CASS 4.1.16
See Notes
Money need not be treated as client money 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, if:
- (1) the authorised fund manager receives it from a client in relation to the authorised fund manager's obligation to issue units, in an AUT or to arrange for the issue of units in an ICVC, in accordance with CIS, unless the price of those units has not been determined by the close of business on the next business day:
- (a) following the date of the receipt of the money from the client; or
- (b) if the money was received by an appointed representative of the authorised fund manager, in accordance with CASS 4.3.15 R, following the date of receipt at the specified business address of the authorised fund manager; or
- (2) the money is held in the course of redeeming units where the proceeds of that redemption are paid to a client within the time specified in CIS; when an authorised fund manager draws a cheque or other payable order within these timeframes the provisions of CASS 4.3.101 R and CASS 4.3.102 R will not apply.
- 01/12/2004
Affiliated companies
CASS 4.1.17
See Notes
- 01/12/2004
CASS 4.1.18
See Notes
Money is not client money if the firm holds it on behalf of, or receives it from, an affiliated company, unless:
- (1) the firm has been notified by the affiliated company that the money belongs to a client of the affiliated company; or
- (2) the affiliated company is a client dealt with at arm's length; or
- (3) the affiliated company is a manager of an occupational pension scheme or is an overseas company; and
- (a) the money is given to the firm in order to carry on designated investment business for or on behalf of the clients of the affiliated company; and
- (b) the firm has been notified by the affiliated company that the money is to be treated as client money.
- 01/12/2004
Money due and payable to the firm
CASS 4.1.19
See Notes
- 01/12/2004
CASS 4.1.20
See Notes
- (1) For fees and commissions payable by customers, 'due and payable' means:
- (a) they have been accurately calculated and are in accordance with a formula or basis previously disclosed to the client by the firm; or
- (b) five business days have elapsed since a statement showing the amount of those fees and commissions has been despatched to the client, and the firm has taken reasonable steps to ensure that the client does not question that sum specified; or
- (c) the precise amount of the fees or commissions has been agreed by the client, or has been determined by a court, arbitrator or arbiter;
- (2) Compliance with (1) may be relied on as tending to establish compliance with CASS 4.1.19 R;
- (3) Contravention of (1) may be relied on as tending to establish contravention of CASS 4.1.19 R.
- 01/12/2004
CASS 4.1.21
See Notes
- 01/12/2004
CASS 4.1.22
See Notes
- 01/12/2004
CASS 4.1.23
See Notes
- 01/12/2004
CASS 4.1.24
See Notes
Solicitors
CASS 4.1.25
See Notes
- 01/12/2004
CASS 4.1.26
See Notes
For the purposes of CASS 4.1.25 R the relevant rules are:
- (1) if regulated by the Law Society (of England and Wales):
- (a) the Solicitors' Accounts Rules 1998; or
- (b) where applicable, the Solicitors Overseas Practice Rules 1990;
- (2) if regulated by the Law Society of Scotland, the Solicitors' (Scotland) Accounts, Accounts Certificate, Professional Practice and Guarantee Fund Rules 2001;
- (3) if regulated by the Law Society of Northern Ireland, the Solicitors' Accounts Regulations 1998.
- 01/12/2004
Trustee firms (other than trustees of unit trust schemes)
CASS 4.1.27
See Notes
- 01/12/2004
CASS 4.1.28
See Notes
CASS 4.1.29
See Notes
This table belongs to COB 9.3.28
Reference | Rule |
CASS 4.1.1 R - CASS 4.1.7 G | Application |
CASS 4.1.27 R - CASS 4.1.29 R | Trustee firms (other than trustees of unit trust schemes) |
CASS 4.2.3 R - CASS 4.2.7 G | Requirement |
CASS 4.3.33 G - CASS 4.3.40 R | Client bank accounts |
CASS 4.3.41 G - CASS 4.3.45 G | A firm's selection of bank |
CASS 4.3.46 R - CASS 4.3.47 R | Group banks |
CASS 4.3.89 R - CASS 4.3.97 R | Reconciliation of client money balances |
CASS 4.2
Statutory trust
- 01/12/2004
Application
CASS 4.2.2
See Notes
- 01/12/2004
Requirement
CASS 4.2.3
See Notes
A firm (other than a firm acting in accordance with CASS 4.2.6 R) receives and holds client money as trustee (or in Scotland as agent) 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) subject to (3), for the clients for whom that money is held, according to their respective interests in it;
- (3) on failure of the firm, for the payment of the costs properly attributable to the distribution of the client money in accordance with (2); and
- (4) after all valid claims and costs under (2) and (3) have been met, for the firm itself.
- 01/12/2004
CASS 4.2.4
See Notes
- 01/12/2004
CASS 4.2.5
See Notes
- 01/12/2004
CASS 4.2.6
See Notes
A trustee firm:
- (1) must receive and hold client money in accordance with the relevant instrument of trust;
- (2) subject to that, receives and holds client money on trust on the terms (or in Scotland on the agency terms) specified in CASS 4.2.3 R.
- 01/12/2004
CASS 4.2.7
See Notes
- 01/12/2004
CASS 4.3
Segregation and operation of client money accounts
- 01/12/2004
Application
CASS 4.3.2
See Notes
- 01/12/2004
CASS 4.3.3
See Notes
- 01/12/2004
CASS 4.3.4
See Notes
- 01/12/2004
CASS 4.3.5
See Notes
A firm must not hold money other than client money in a client bank account unless it is:
- (1) a minimum sum required to open the account, or to keep it open; or
- (2) money temporarily in the account in accordance with CASS 4.3.13 R (Mixed remittance); or
- (3) interest credited to the account which exceeds the amount due to clients as interest and has not yet been withdrawn by the firm.
- 01/12/2004
CASS 4.3.6
See Notes
- 01/12/2004
CASS 4.3.7
See Notes
- 01/12/2004
Payment of client money into a client bank account
CASS 4.3.8
See Notes
A firm must segregate client money it receives using either:
- (1) the approach detailed in CASS 4.3.10 R (the 'normal approach'); or
- (2) the approach detailed in CASS 4.3.12 R (the 'alternative approach'), subject to:
- (a) written confirmation to the FSA from the firm's auditor that the firm has in place systems and controls which are adequate to enable it to operate the alternative approach effectively; and
- (b) the firm appointing a manager responsible for compliance with the client money rules.
- 01/12/2004
CASS 4.3.9
See Notes
- 01/12/2004
CASS 4.3.10
See Notes
If a firm receives and segregates client money, unless it adopts the alternative approach, it must, subject to CASS 4.1.15 R and CASS 4.1.16 R, CASS 4.3.11 R, CASS 4.3.13 R, CASS 4.3.15 R and CASS 4.3.21 R (delivery versus payment) either:
- (1) pay it as soon as possible, and in any event no later than the next business day after receipt, into a client bank account; or
- (2) pay it out in accordance with CASS 4.3.99 R.
- 01/12/2004
CASS 4.3.11
See Notes
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.
- 01/12/2004
CASS 4.3.12
See Notes
Under the alternative approach, a firm receiving and segregating client money:
- (1) is required to pay any money to or on behalf of clients out of its own account;
- (2) is required to perform the segregation calculation contained in CASS 4.3.67 R, adjust the balance held in its client bank accounts and then segregate the money in the client bank account until the calculation is re-performed on the next business day;
- (3) is not required to pay client money into a client bank account in accordance with any of CASS 4.3.10 R(1), CASS 4.3.11 R, CASS 4.3.13 R, CASS 4.3.15 R(1) and (2), CASS 4.3.21 R(1) and (2)(b) and CASS 4.3.24 R(1);
- (4) may receive all client money into its own bank account;
- (5) may choose to operate the alternative approach for some types of business (for example overseas equities transactions) and operate the normal approach for other types of business (for example contingent liability investments) if the firm can demonstrate that its systems and controls are adequate; and
- (6) may use an historic average to account for uncleared cheques in accordance with CASS 4.3.69 G.
- 01/12/2004
Mixed remittance
CASS 4.3.13
See Notes
If a firm receives a mixed remittance (that is part client money and part other money), it must:
- (1) pay the full sum into a client bank account in accordance with CASS 4.3.10 R(1); and
- (2) pay the money that is not client money out of the client bank account within one business day of the day on which the firm would normally expect the remittance to be cleared.
- 01/12/2004
CASS 4.3.14
See Notes
- 01/12/2004
Appointed representatives, field representatives and other agents
CASS 4.3.15
See Notes
A firm must establish and maintain procedures to ensure that client money received by its appointed representatives, field representatives or other agents is:
- (1) paid into a client bank account of the firm in accordance with CASS 4.3.10 R(1); or
- (2) forwarded to the firm, or in the case of a field representative forwarded to a specified business address of the firm, so as to ensure that the money arrives at the specified business address by the close of the third business day.
- 01/12/2004
CASS 4.3.16
See Notes
- 01/12/2004
CASS 4.3.17
See Notes
- 01/12/2004
CASS 4.3.18
See Notes
- 01/12/2004
Client entitlements
CASS 4.3.19
See Notes
- 01/12/2004
CASS 4.3.20
See Notes
- 01/12/2004
CASS 4.3.21
See Notes
When a firm receives a client entitlement on behalf of a client, it must pay any part of it which is client money:
- (1) for client entitlements received in the United Kingdom, into a client bank account in accordance with CASS 4.3.10 R(1); or
- (2) for client entitlements received outside the United Kingdom, into any bank account operated by the firm, provided that such client money is:
- (a) paid to, or in accordance with, the instructions of the client concerned; or
- (b) paid into a client bank account in accordance with CASS 4.3.10 R(1), as soon as possible but no later than five business days after the firm is notified of its receipt.
- 01/12/2004
CASS 4.3.22
See Notes
- 01/12/2004
CASS 4.3.23
See Notes
- (1) A firm should allocate client entitlements due to the individual clients within a period of ten business days.
- (2) Compliance with (1) may be relied on as tending to establish compliance with CASS 4.3.22 R.
- (3) Contravention of (1) may be relied on as tending to establish contravention of CASS 4.3.22 R.
- 01/12/2004
Money due to a client from a firm
CASS 4.3.24
See Notes
If a firm is liable to pay money to a client, it must as soon as possible, and no later than one business day after the money is due and payable:
- (1) pay it into a client bank account, in accordance with CASS 4.3.10 R(1); or
- (2) pay it to, or to the order of, the client.
- 01/12/2004
CASS 4.3.25
See Notes
- 01/12/2004
Interest
CASS 4.3.26
See Notes
CASS 4.3.27
See Notes
CASS 4.3.28
See Notes
- 01/12/2004
Transfer of client money to a third party
CASS 4.3.29
See Notes
CASS 4.3.30
See Notes
A firm may allow another person, such as an exchange, a clearing house or an intermediate broker, to hold or control client money, but only if:
- (1) the firm transfers the client money:
- (a) for the purpose of a transaction for a client through or with that person; or
- (b) to meet a client's obligation to provide collateral for a transaction (for example, an initial margin requirement for a contingent liability investment); and
- (2) in the case of a private customer, that customer has been notified that the client money may be transferred to the other person.
CASS 4.3.31
See Notes
- 01/12/2004
CASS 4.3.32
See Notes
- 01/12/2004
Client bank accounts
CASS 4.3.33
See Notes
- 01/12/2004
CASS 4.3.34
See Notes
- (1) A firm must ensure that, subject to CASS 4.3.30 R and CASS 4.3.40 R, client money is held in a client bank account at one or more approved banks.
- (2) If the firm is a trustee firm, it must:
- (a) hold client money in a client bank account with an approved bank at all times; and
- (b) maintain separate client bank accounts for each trust.
- 01/12/2004
CASS 4.3.35
See Notes
A firm may open one or more client bank accounts in the form of a designated client bank account. Characteristics of these accounts are that:
- (1) the account holds money of one or more clients;
- (2) the account includes in its title the word 'designated';
- (3) the clients whose money is in the account have each consented in writing to the use of the bank with which the client money is to be held; and
- (4) in the event of the failure of that bank, the account is not pooled with any other type of account unless a primary pooling event occurs.
- 01/12/2004
CASS 4.3.36
See Notes
A firm may open one or more client bank accounts in the form of a designated client fund account. Characteristics of these accounts are that:
- (1) the account holds at least part of the client money of one or more clients, each of whom has consented to that money being held in the same client bank accounts at the same banks (the client money of such clients constituting a designated fund);
- (2) the account includes in its title the words 'designated fund'; and
- (3) in the event of the failure of a bank with which part of a designated fund is held, each designated client fund account held with the failed bank will form a pool with any other designated client fund account containing part of that same designated fund unless a primary pooling event occurs.
- 01/12/2004
CASS 4.3.37
See Notes
- 01/12/2004
CASS 4.3.38
See Notes
- 01/12/2004
CASS 4.3.39
See Notes
- 01/12/2004
CASS 4.3.40
See Notes
A firm (other than a trustee firm) may hold client money with a bank that is not an approved bank if all of the following conditions are met:
- (1) the client money relates to:
- (a) the settlement of a transaction, or a series of transactions; or
- (b) the distribution of income;
- subject to the law or market practice of a jurisdiction outside the United Kingdom;
- (2) because of the applicable law or market practice of that overseas jurisdiction, it is not possible to hold the client money in a client bank account with an approved bank;
- (3) the firm holds the money with such a bank for no longer than is necessary to effect the transaction, or series of transactions;
- (4) the firm notifies each relevant market counterparty and intermediate customer and obtains the prior written consent of each relevant private customer that:
- (a) the client money will not be held with an approved bank;
- (b) in such circumstances, the legal and regulatory regime applying to the bank with which the client money is held will be different from that of the United Kingdom and, in the event of a failure of the bank, the client money may be treated differently from the treatment which would apply if the client money were held by an approved bank in the United Kingdom; and
- (c) if it is the case, the particular bank has not accepted that it has no right of set off or counterclaim against client money held, in respect of any sum owed by the firm on any other account held at that bank, as required by CASS 4.3.48 R; and
- (5) the client money is held in a designated bank account.
A firm's selection of a bank
CASS 4.3.41
See Notes
- 01/12/2004
CASS 4.3.42
See Notes
- 01/12/2004
CASS 4.3.43
See Notes
- 01/12/2004
CASS 4.3.44
See Notes
When considering where to place client money and to determine the frequency of the appropriateness test under CASS 4.3.42 R, a firm should consider taking into account, together with any other relevant matters:
- (1) the capital of the bank;
- (2) the amount of client money placed, as a proportion of the bank's capital and deposits;
- (3) the credit rating of the bank (if available); and
- (4) to the extent that the information is available, the level of risk in the investment and loan activities undertaken by the bank and its affiliated companies.
- 01/12/2004
CASS 4.3.45
See Notes
- 01/12/2004
Group banks
CASS 4.3.46
See Notes
Subject to CASS 4.3.40 R, a firm that holds or intends to hold client money with a bank which is in the same group as the firm must:
- (1) undertake a continuous review in relation to that bank which is at least as rigorous as the review of any bank which is not in the same group, in order to ensure that the decision to use a group bank is appropriate for the client or trust;
- (2) disclose in writing to its client at the outset of the client relationship or, if later, not less than 20 business days before it begins to hold client money of that client with that bank:
- (a) that it is holding or intends to hold client money with a bank in the same group; and
- (b) the identity of the bank concerned.
- 01/12/2004
CASS 4.3.47
See Notes
If a client has notified a firm in writing that he does not wish his money to be held with a bank in the same group as the firm, the firm must either:
- (1) place that client money in a client bank account with another bank in accordance with CASS 4.3.34 R; or
- (2) return that client money to, or pay it to the order of, the client.
- 01/12/2004
Notification and acknowledgement of trust (banks)
CASS 4.3.48
See Notes
When a firm opens a client bank account, the firm must give or have given written notice to the bank requesting the bank to acknowledge to it in writing:
- (1) that all money standing to the credit of the account is held by the firm as trustee (or if relevant, as agent) and that the bank is not entitled to combine the account with any other account or to exercise any right of set-off or counterclaim against money in that account in respect of any sum owed to it on any other account of the firm; and
- (2) that the title of the account sufficiently distinguishes that account from any account containing money that belongs to the firm, and is in the form requested by the firm.
- 01/12/2004
CASS 4.3.49
See Notes
- 01/12/2004
CASS 4.3.50
See Notes
- 01/12/2004
CASS 4.3.51
See Notes
- 01/12/2004
Notification and acknowledgement of trust (exchange, clearing house, intermediate broker or OTC counterparty)
CASS 4.3.52
See Notes
A firm which undertakes any contingent liability investment for clients through an exchange, clearing house, intermediate broker or OTC counterparty must, before the client transaction account is opened with the exchange, clearing house, intermediate broker or OTC counterparty:
- (1) notify the person with whom the account is to be opened that the firm is under an obligation to keep client money separate from the firm's own money, placing client money in a client bank account;
- (2) instruct the person with whom the account is to be opened that any money paid to it in respect of that transaction is to be credited to the firm's client transaction account; and
- (3) require the person with whom the account is to be opened to acknowledge in writing that the firm's client transaction account is not to be combined with any other account, nor is any right of set-off to be exercised by that person against money credited to the client transaction account in respect of any sum owed to that person on any other account.
- 01/12/2004
CASS 4.3.53
See Notes
- 01/12/2004
CASS 4.3.54
See Notes
- 01/12/2004
CASS 4.3.55
See Notes
- 01/12/2004
Notification to clients: use of an approved bank outside the United Kingdom
CASS 4.3.56
See Notes
A firm must not hold client money in a client bank account outside the United Kingdom, unless the firm has previously disclosed to the client in writing:
- (1) that his money may be deposited in a client bank account outside the United Kingdom;
- (2) that in such circumstances, the legal and regulatory regime applying to the approved bank will be different from that of the United Kingdom and, in the event of a failure of the bank, his money may be treated in a different manner from that which would apply if the client money was held by a bank in the United Kingdom; and
- (3) if it is the case, that a particular bank has not accepted that it has no right of set-off or counterclaim against money held in a client bank account in respect of any sum owed on any other account of the firm, notwithstanding the firm's request to the bank as required by CASS 4.3.48 R.
- 01/12/2004
CASS 4.3.57
See Notes
- 01/12/2004
CASS 4.3.58
See Notes
- 01/12/2004
CASS 4.3.59
See Notes
If a client has notified a firm in writing before entering into a transaction that client money is not to be held in a particular jurisdiction, the firm must either:
- (1) hold the client money in a client bank account in a jurisdiction to which the client has not objected; or
- (2) return the client money to, or to the order of, the client.
- 01/12/2004
CASS 4.3.60
See Notes
- 01/12/2004
Notification to clients: use of an intermediate broker, settlement agent or OTC counterparty outside the United Kingdom.
CASS 4.3.61
See Notes
A firm must not undertake any transaction for a client that involves client money being passed to an intermediate broker, settlement agent or OTC counterparty located in a jurisdiction outside the United Kingdom, unless the firm has previously disclosed in writing to the client:
- (1) that his client money may be passed to a person outside the United Kingdom; and
- (2) that, in such circumstances, the legal and regulatory regime applying to the intermediate broker, settlement agent or OTC counterparty will be different from that of the United Kingdom and, in the event of a failure of the intermediate broker, settlement agent or OTC counterparty, this money may be treated in a different manner from that which would apply if the money was held by an intermediate broker, settlement agent or OTC counterparty in the United Kingdom.
- 01/12/2004
CASS 4.3.62
See Notes
- 01/12/2004
CASS 4.3.63
See Notes
If a client has notified a firm before entering into a transaction that he does not wish his money to be passed to an intermediate broker, settlement agent or OTC counterparty 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 client 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 client.
- 01/12/2004
Notification to the FSA: failure of a bank, intermediate broker, settlement agent or OTC counterparty
CASS 4.3.64
See Notes
On the failure of a third party with which money is held, a firm must notify the FSA:
- (1) as soon as it becomes aware of the failure of any bank, intermediate broker, settlement agent, OTC counterparty or other entity with which it has placed, or to which it has passed, client money; and
- (2) as soon as reasonably practical, whether it intends to make good any shortfall that has arisen or may arise and of the amounts involved.
- 01/12/2004
Client money calculation
CASS 4.3.65
See Notes
The purpose of the client money calculation is:
- (1) for the normal approach, to act as a check that the amount of client money that is segregated at banks and third parties is sufficient to meet the firm's obligations to its clients on a daily basis;
- (2) for the alternative approach, to calculate the appropriate amount of client money to be segregated at banks and third parties which is sufficient to meet a firm's obligations to its clients on a daily basis.
- 01/12/2004
CASS 4.3.66
See Notes
Each business day, a firm that adopts the normal approach in accordance with CASS 4.3.8 R must:
- (1) check whether its client money resource, being the aggregate balance on the firm's client bank accounts, as at the close of business on the previous business day, was at least equal to the client money requirement, as defined in CASS 4.3.71 R, as at the close of business on that day; and
- (2) ensure that:
- (a) any shortfall is paid into a client bank account by the close of business on the day the calculation is performed; or
- (b) any excess is withdrawn within the same time period unless CASS 4.3.5 R or CASS 4.3.6 R applies.
- 01/12/2004
CASS 4.3.67
See Notes
- 01/12/2004
CASS 4.3.68
See Notes
- 01/12/2004
CASS 4.3.69
See Notes
- 01/12/2004
CASS 4.3.70
See Notes
- 01/12/2004
Client money requirement
CASS 4.3.71
See Notes
The client money requirement is either:
- (1) (subject to CASS 4.3.85 R) the sum of, for all clients:
- (a) the individual client balances calculated in accordance with CASS 4.3.72 R, excluding:
- (i) individual client balances which are negative (that is, debtors); and
- (ii) clients' equity balances calculated in accordance with CASS 4.3.79 R; and
- (b) the total margined transaction requirement, calculated in accordance with CASS 4.3.81 R; or
- (2) the sum of:
- (a) for each client bank account:
- (i) the amount which the firm's records show as held on that account; and
- (ii) an amount that offsets each negative net amount which the firm's records show attributed to that account for an individual client; and
- (b) the total margined transaction requirement, which is calculated in accordance with CASS 4.3.81 R.
- 01/12/2004
General transactions
CASS 4.3.72
See Notes
- 01/12/2004
CASS 4.3.73
See Notes
This table belongs to CASS 4.3.72 R.
Individual client balance calculation | ||||
Free money (no trades) and | A | |||
sale proceeds due to the client: | ||||
(a) | in respect of principal deals when the client has delivered the designated investments; and | B | ||
(b) | in respect of agency deals, when either: | |||
(i) | the sale proceeds have been received by the firm and the client has delivered the designated investments; or | C1 | ||
(ii) | the firm holds the designated investments for the client; and | C2 | ||
the cost of purchases: | ||||
(c) | in respect of principal deals, paid for by the client but the firm has not delivered the designated investments to the client; and | D | ||
(d) | in respect of agency deal, paid for by the client when either: | |||
(i) | the firm has not remitted the money to, or to the order of, the counterparty; or | E1 | ||
(ii) | the designated investments have been received by the firm but have not been delivered to the client; | E2 | ||
Less | ||||
money owed by the client in respect of unpaid purchases by or for the client if delivery of those designated investments has been made to the client; and | F | |||
Proceeds remitted to the client in respect of sales transactions by or for the client if the client has not delivered the designated investments. | G | |||
Individual Client Balance 'X' = (A+B+C1+C2+D+E1+E2)-F-G | X |
- 01/12/2004
CASS 4.3.74
See Notes
- 01/12/2004
CASS 4.3.75
See Notes
- 01/12/2004
CASS 4.3.76
See Notes
- 01/12/2004
CASS 4.3.77
See Notes
- 01/12/2004
CASS 4.3.78
See Notes
Firms are reminded of the provisions of CASS 4.3.10 R and CASS 4.3.12 R which require a firm to segregate client money into client bank accounts within a certain period. In determining the client money requirement under CASS 4.3.71 R, a firm:
- (1) should include dividends received and interest earned and allocated;
- (2) may deduct outstanding fees, calls, rights and interest charges and other amounts owed by the client in accordance with CASS 4.1.20 E;
- (3) need not include client money which, under CASS 4.3.21 R(2), is not required to be segregated nor include client money forwarded to the firm, in accordance with CASS 4.3.17 R, but not received;
- (4) should take into account any client money arising from CASS 4.3.95 R; and
- (5) should include any unallocated client money.
- 01/12/2004
Equity balance
CASS 4.3.79
See Notes
- 01/12/2004
CASS 4.3.80
See Notes
- 01/12/2004
Margined transaction requirement
CASS 4.3.81
See Notes
The total margined transaction requirement is:
- (1) the sum of each of the client's equity balances, as defined in CASS 4.3.79 R, which are positive;
- (2) the proportion of any individual negative client equity balance which is secured by approved collateral; and
- (3) the net aggregate of the firm's equity balance (negative balances being deducted from positive balances) on transaction accounts for customers with exchanges, clearing houses, intermediate brokers and OTC counterparties.
CASS 4.3.82
See Notes
- 01/12/2004
CASS 4.3.83
See Notes
- 01/12/2004
CASS 4.3.84
See Notes
Reduced client money requirement option
CASS 4.3.85
See Notes
- (1) When, in respect of a client, there is a positive individual client balance and a negative client equity balance, a firm may offset the credit against the debit and hence have a reduced individual client balance in CASS 4.3.72 R for that client.
- (2) When, in respect of a client, there is a negative individual client balance and a positive client equity balance, a firm may offset the credit against the debit and hence have a reduced client equity balance in CASS 4.3.81 R for that client.
CASS 4.3.86
See Notes
- 01/12/2004
Failure to perform calculations
CASS 4.3.87
See Notes
- 01/12/2004
CASS 4.3.88
See Notes
- 01/12/2004
Reconciliation of client money balances: frequency of reconciliation
CASS 4.3.89
See Notes
- 01/12/2004
CASS 4.3.90
See Notes
- 01/12/2004
CASS 4.3.91
See Notes
- 01/12/2004
Reconciliation method
CASS 4.3.92
See Notes
A firm must compare:
- (1) the balance on each client bank account as recorded by the firm with the balance on that account as set out on the statement or other form of confirmation issued by the bank with which those accounts are held; and
- (2) the balance, currency by currency, on each client transaction account as recorded by the firm, with the balance on that account as set out in the statement or other form of confirmation issued by the person with whom the account is held;
and identify any discrepancies between them.
- 01/12/2004
CASS 4.3.93
See Notes
- 01/12/2004
Reconciliation discrepancies
CASS 4.3.94
See Notes
- 01/12/2004
CASS 4.3.95
See Notes
- 01/12/2004
CASS 4.3.96
See Notes
- 01/12/2004
CASS 4.3.97
See Notes
- 01/12/2004
Discharge of fiduciary duty
CASS 4.3.98
See Notes
CASS 4.3.99
See Notes
Money ceases to be client money if it is paid:
- (1) to the client, or a duly authorised representative of the client; or
- (2) to a third party on the instruction of the client, unless it is transferred to a third party in the course of effecting a transaction, in accordance with CASS 4.3.30 R; or
- (3) into a bank account of the client (not being an account which is also in the name of the firm); or
- (4) to the firm itself, when it is due and payable to the firm in accordance with CASS 4.1.19 R to CASS 4.1.24 G; or
- (5) to the firm itself, when it is an excess in the client bank account as set out in CASS 4.3.66 R(2)(b).
- 01/12/2004
CASS 4.3.100
See Notes
- 01/12/2004
CASS 4.3.101
See Notes
- 01/12/2004
CASS 4.3.102
See Notes
- 01/12/2004
Allocated but unclaimed client money
CASS 4.3.103
See Notes
- 01/12/2004
CASS 4.3.104
See Notes
- 01/12/2004
CASS 4.3.105
See Notes
- (1) Reasonable steps should include:
- (a) entering into a written agreement, in which the client consents to the firm releasing, after the period of time specified in (b), any client money balances, for or on behalf of that client, from client bank accounts;
- (b) determining that there has been no movement on the client's balance for a period of at least six years (notwithstanding any payments or receipts of charges, interest or similar items);
- (c) writing to the client at the last known address informing the client of the firm's intention of no longer treating that balance as client money, giving the client 28 days to make a claim;
- (d) making and retaining records of all balances released from client bank accounts; and
- (e) undertaking to make good any valid claim against any released balances;
- (2) Compliance with (1) may be relied on as tending to establish compliance with CASS 4.3.104 R;
- (3) Contravention of (1) may be relied on as tending to establish contravention of CASS 4.3.104 R.
- 01/12/2004
CASS 4.3.106
See Notes
- 01/12/2004
Commodity Futures Trading Commission Part 30 exemption order
CASS 4.3.106A
See Notes
- 01/01/2005
CASS 4.3.107
See Notes
CASS 4.3.108
See Notes
CASS 4.3.109
See Notes
- 01/12/2004
CASS 4.3.110
See Notes
- 01/12/2004
Records
CASS 4.3.111
See Notes
- 01/12/2004
CASS 4.4
Client money distribution
- 01/12/2004
Application
CASS 4.4.1
See Notes
- 01/12/2004
CASS 4.4.2
See Notes
- 01/12/2004
Purpose
CASS 4.4.3
See Notes
- 01/12/2004
Failure of the authorised firm: primary pooling event
CASS 4.4.4
See Notes
- 01/12/2004
CASS 4.4.5
See Notes
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 section 48(1)(b) 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 FSA, in accordance with CASS 4.3.97 R, that it is unable correctly to identify and allocate in its records all valid claims arising as a result of a secondary pooling event.
- 01/12/2004
CASS 4.4.6
See Notes
CASS 4.4.5 R(4) does not apply so long as:
- 01/12/2004
Pooling and distribution
CASS 4.4.7
See Notes
If a primary pooling event occurs:
- (1) client money held in each client money account of the firm is treated as pooled; and
- (2) the firm must distribute that client money in accordance with CASS 4.2.3 R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 4.3.85 R.
- 01/12/2004
CASS 4.4.8
See Notes
- 01/12/2004
Client money received after the failure of the firm
CASS 4.4.9
See Notes
Client money received by the firm after a primary pooling event must not be pooled with client money held in any client money account operated by the firm at the time of the primary pooling event. It must be placed in a client bank account that has been opened after that event and must be handled in accordance with the client money rules, and returned to the relevant client without delay, except to the extent that:
- (1) it is client money relating to a transaction that has not settled at the time of the primary pooling event; or
- (2) it is client money relating to a client, for whom the client money entitlement, calculated in accordance with CASS 4.3.85 R, shows that money is due from the client to the firm at the time of the primary pooling event.
- 01/12/2004
CASS 4.4.10
See Notes
Client money received after the primary pooling event relating to an unsettled transaction should be used to settle that transaction. Examples of such transactions include:
- (1) an equity transaction with a trade date before the date of the primary pooling event and a settlement date after the date of the primary pooling event; or
- (2) a contingent liability investment that is 'open' at the time of the primary pooling event and is due to settle after the primary pooling event.
- 01/12/2004
CASS 4.4.11
See Notes
If a firm receives a mixed remittance after a primary pooling event, it must:
- (1) pay the full sum into the separate client bank account opened in accordance with CASS 4.4.9 R; and
- (2) pay the money that is not client money out of that client bank account into a firm's own bank account within one business day of the day on which the firm would normally expect the remittance to be cleared.
- 01/12/2004
CASS 4.4.12
See Notes
- 01/12/2004
Failure of a bank, intermediate broker, settlement agent or OTC counterparty: secondary pooling events
CASS 4.4.13
See Notes
- 01/12/2004
CASS 4.4.14
See Notes
- 01/12/2004
CASS 4.4.15
See Notes
- 01/12/2004
CASS 4.4.16
See Notes
- 01/12/2004
CASS 4.4.17
See Notes
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.
By demonstrating compliance with CASS 4.3.42 R, a firm should be able to demonstrate that it has taken reasonable steps to comply with its duties.
- 01/12/2004
Failure of a bank
CASS 4.4.18
See Notes
- 01/12/2004
CASS 4.4.19
See Notes
- 01/12/2004
Failure of a bank: pooling
CASS 4.4.20
See Notes
If a secondary pooling event occurs as a result of the failure of a bank where one or more general client bank accounts are held, then:
- (1) in relation to every general client bank account of the firm, the provisions of CASS 4.4.22 R and CASS 4.4.27 R to CASS 4.4.29 G will apply:
- (2) in relation to every designated client bank account held by the firm with the failed bank, the provisions of CASS 4.4.24 R and CASS 4.4.27 R to CASS 4.4.29 G will apply;
- (3) in relation to each designated client fund account held by the firm with the failed bank, the provisions of CASS 4.4.25 R and CASS 4.4.27 R to CASS 4.4.29 G will apply;
- (4) any money held at a bank, other than the bank that has failed, in designated client bank accounts, is not pooled with any other client money; and
- (5) any money held in a designated client fund account, no part of which is held by the bank that has failed, is not pooled with any other client money.
- 01/12/2004
CASS 4.4.21
See Notes
If a secondary pooling event occurs as a result of the failure of a bank where one or more designated client bank accounts or designated client fund accounts are held, then;
- (1) in relation to every designated client bank account held by the firm with the failed bank, the provisions of CASS 4.4.24 R and CASS 4.4.27 R to CASS 4.4.29 G will apply; and
- (2) in relation to each designated client fund account held by the firm with the failed bank, the provisions of CASS 4.4.25 R and CASS 4.4.27 R to CASS 4.4.29 G will apply.
- 01/12/2004
CASS 4.4.22
See Notes
Money held in each general client bank account and client transaction account of the firm must be treated as pooled and:
- (1) any shortfall in client money held, or which should have been held, in general client bank accounts and client transaction accounts, that has arisen as a result of the failure of the bank, must be borne by all the clients whose client money is held in either a general client bank account or client transaction account of the firm, rateably in accordance with their entitlements;
- (2) a new client money entitlement must be calculated for each client by the firm, to reflect the requirements in (1), and the firm's records must be amended to reflect the reduced client money entitlement;
- (3) the firm must make and retain a record of each client's share of the client money shortfall at the failed bank until the client is repaid; and
- (4) the firm must use the new client entitlements, calculated in accordance with (2), when performing the daily client money calculation in accordance with CASS 4.3.65 G to CASS 4.3.85 R.
- 01/12/2004
CASS 4.4.23
See Notes
- 01/12/2004
CASS 4.4.24
See Notes
For each client with a designated client bank account held at the failed bank:
- (1) any shortfall in client money held, or which should have been held, in designated client bank accounts that has arisen as a result of the failure, must be borne by all the clients whose client money is held in a designated client bank account of the firm at the failed bank, rateably in accordance with their entitlements;
- (2) a new client money entitlement must be calculated for each of the relevant clients by the firm, and the firm's records must be amended to reflect the reduced client money entitlement;
- (3) the firm must make and retain a record of each client's share of the client money shortfall at the failed bank until the client is repaid; and
- (4) the firm must use the new client money entitlements, calculated in accordance with (2), when performing the daily client money calculation, in accordance with CASS 4.3.65 G to CASS 4.3.85 R.
- 01/12/2004
CASS 4.4.25
See Notes
Money held in each designated client fund account with the failed bank must be treated as pooled with any other designated client fund accounts of the firm which contain part of the same designated fund and:
- (1) any shortfall in client money held, or which should have been held, in designated client fund accounts that has arisen as a result of the failure, must be borne by each of the clients whose client money is held in that designated fund, rateably in accordance with their entitlements;
- (2) a new client entitlement must be calculated for each client by the firm, in accordance with (1), and the firm's records must be amended to reflect the reduced client money entitlement;
- (3) the firm must make and retain a record of each client's share of the client money shortfall at the failed bank until the client is repaid; and
- (4) the firm must use the new client money entitlements, calculated in accordance with (2), when performing the daily client money calculation in accordance with COB 9.3.99 to COB 9.3.119.
CASS 4.4.26
See Notes
- 01/12/2004
Client money received after the failure of a bank
CASS 4.4.27
See Notes
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:
- 01/12/2004
CASS 4.4.28
See Notes
If a firm receives a mixed remittance after the secondary pooling event which consists of client money that would have been paid into a general client bank account, a designated client bank account or a designated client fund account maintained at the bank that has failed, it must:
- (1) pay the full sum into a client bank account other than one operated at the bank that has failed; and
- (2) pay the money that is not client money out of that client bank account within one business day of the day on which the firm would normally expect the remittance to be cleared.
- 01/12/2004
CASS 4.4.29
See Notes
- 01/12/2004
Failure of an intermediate broker, settlement agent or OTC counterparty: Pooling
CASS 4.4.30
See Notes
- 01/12/2004
CASS 4.4.31
See Notes
Money held in each general client bank account and client transaction account of the firm must be treated as pooled and:
- (1) any shortfall in client money held, or which should have been held, in general client bank accounts and client transaction account, that has arisen as a result of the failure, must be borne by all the clients whose client money is held in either a general client bank account or a client transaction accounts of the firm, rateably in accordance with their entitlements;
- (2) a new client money entitlement must be calculated for each client by the firm, to reflect the requirements of (1), and the firm's records must be amended to reflect the reduced client money entitlement;
- (3) the firm must make and retain a record of each client's share of the client money shortfall at the failed intermediate broker, settlement agent or OTC counterparty until the client is repaid; and
- (4) the firm must use the new client money entitlements, calculated in accordance with (2), when performing the daily client money calculation, in accordance with CASS 4.3.65 G to CASS 4.3.85 R.
- 01/12/2004
Client money received after the failure of an intermediate broker, settlement agent or OTC counterparty
CASS 4.4.32
See Notes
Client money received by the firm after the failure of an intermediate broker, settlement agent or OTC counterparty, that would otherwise have been paid into a client transaction account at that intermediate broker, settlement agent or OTC counterparty:
- (1) must not be transferred to the failed third party unless specifically instructed by the client in order to settle an obligation of that client to the failed intermediate broker, settlement agent or OTC counterparty; 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:
- 01/12/2004
Notification on the failure of a bank, intermediate broker, settlement agent or OTC counterparty
CASS 4.4.33
See Notes
- 01/12/2004
CASS 4.5
Mandate Rules
- 01/12/2004
Application
CASS 4.5.1
See Notes
- 01/12/2004
CASS 4.5.2
See Notes
- 01/12/2004
CASS 4.5.3
See Notes
- 01/12/2004
Purpose
CASS 4.5.4
See Notes
- 01/12/2004
General
CASS 4.5.5
See Notes
A firm that holds authorities of the sort referred to in CASS 4.5.1 R, must establish and maintain adequate records and internal controls in respect of its use of the mandates, which must include:
- (1) an up-to-date list of the authorities and any conditions placed by the client or the firm's management on the use of them;
- (2) a record of all transactions entered into using the authority and internal controls to ensure that they are within the scope of authority of the person and the firm entering into the transaction; and
- (3) the details of the procedures and authorities for the giving and receiving of instructions under the authority; and
- (4) where the firm holds a passbook or similar documents belonging to the client, internal controls, for the safeguarding (including against loss, unauthorised destruction, theft, fraud or misuse) of any passbook or similar document belonging to the client held by the firm.
- 01/12/2004
CASS 5
Client money and mandates: insurance mediation activity
CASS 5.1
Application
- 14/01/2005
CASS 5.1.1
See Notes
- (1) CASS 5.1 to CASS 5.6 apply, subject to (2), (3) and CASS 5.1.3 R to CASS 5.1.6 R, to a firm that receives or holds money in the course of or in connection with its insurance mediation activity.
- (2) CASS 5.1 to CASS 5.6 do not, subject to (3), apply:
- (a) to a firm to the extent that it acts in accordance with the CASS 4; or
- (b) to a firm in carrying on an insurance mediation activity which is in respect of a reinsurance contract; or
- (c) to an insurance undertaking in respect of its permitted activities; or
- (d) to a managing agent when acting as such; or
- (e) with respect to money held by a firm which:
- (i) is an approved bank; and
- (ii) has requisite capital under article 4(4)(b) of the IMD;
- but only when held by the firm in an account with itself, in which case the firm must notify the client (whether through a client agreement, terms of business, or otherwise in writing) that:
- (3) A firm may elect to comply with:
- (a) CASS 5.1 to CASS 5.6 in respect of client money which it receives in the course of carrying on insurance mediation activity in respect of reinsurance contracts; and
- (b) CASS 5.1, CASS 5.2 and CASS 5.4 to CASS 5.6 in respect of money which it receives in the course of carrying on an activity which would be insurance mediation activity, and which money would be client money, but for article 72D of the Regulated Activities Order (Large risks contracts where risk situated outside the EEA);
- but the election must be in respect of all the firm's business which consists of that activity.
- (4) A firm must keep a record of any election in (3).
CASS 5.1.2
See Notes
- 14/01/2005
CASS 5.1.3
See Notes
CASS 5.1.4
See Notes
For the purposes of CASS 5.1.3 R the relevant rules are:
- (1) If regulated by the Law Society (of England and Wales);
- (a) the Solicitors' Accounts Rules 1998; or
- (b) where applicable, the Solicitors Overseas Practice Rules 1990;
- (2) if regulated by the Law Society of Scotland, the Solicitors' (Scotland) Accounts, Accounts Certificate, Professional Practice and Guarantee Fund Rules 2001;
- (3) if regulated by the Law Society of Northern Ireland, the Solicitors' Accounts Regulations 1998.
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CASS 5.1.4A
See Notes
- (1) A firm will, subject to (3), be deemed to comply with CASS 5.3 to CASS 5.6 if it receives or holds client money and it either:
- (a) in relation to a service charge, complies with the requirement to segregate such money in accordance with section 42 of the Landlord and Tenant Act 1987 ("the 1987 Act"); or
- (b) in relation to money which is clients' money for the purpose of the Royal Institution of Chartered Surveyors' Rules of Conduct ("RICS rules") in force as at 14 January 2005, it complies with the requirement to segregate and account for such money in accordance with the RICS Members' Accounts rules.
- (2) Paragraph (1)(a) also applies to a firm in Scotland or in Northern Ireland if in acting as a property manager the firm receives or holds a service charge and complies (so far as practicable) with section 42 of the 1987 Act as if the requirements of that provision applied to it.
- (3) In addition to complying with (1), a firm must ensure that an account in which money held pursuant to the trust fund mentioned in section 42(3) of the 1987 Act or an account maintained in accordance with the RICS rules satisfies the requirements in CASS 5.5.49 R to the extent that the firm will hold money as trustee or otherwise on behalf of its clients.
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CASS 5.1.5
See Notes
Subject to CASS 5.1.5A R money is not client money when:
- (1) it becomes properly due and payable to the firm:
- (a) for its own account; or
- (b) in its capacity as agent of an insurance undertaking where the firm acts in accordance with CASS 5.2; or
- (2) it is otherwise received by the firm pursuant to an arrangement made between an insurance undertaking and another person (other than a firm) by which that other person has authority to underwrite risks, settle claims or handle refunds of premiums on behalf of that insurance undertaking outside the United Kingdom and where the money relates to that business.
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CASS 5.1.5A
See Notes
CASS 5.1.5 R (1)(b) and CASS 5.1.5 R (2) do not apply, and hence money is client money, in any case where:
- (1) in relation to an activity specified in CASS 5.2.3 R (1) (a) to CASS 5.2.3 R (1) (c), the insurance undertaking has agreed that the firm may treat money which it receives and holds as agent of the undertaking, as client money and in accordance with the provisions of CASS 5.3 to CASS 5.6; and
- (2) the agreement in (1) is in writing and adequate to show that the insurance undertaking consents to its interests under the trusts (or in Scotland agency) in CASS 5.3.2 R or CASS 5.4.7 R being subordinated to the interests of the firm's other clients.
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CASS 5.1.6
See Notes
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Purpose
CASS 5.1.7
See Notes
- (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 IMD that all necessary measures should be taken to protect clients against the inability of an insurance intermediary to transfer premiums to an insurance undertaking or to transfer the proceeds of a claim or premium refund to the insured.
- (2) There are two particular approaches which firms can adopt which reflect options given in article 4.4. The first is to provide by law or contract for a transfer of risk from the insurance intermediary to the insurance undertaking (CASS 5.2). The second is that client money is strictly segregated by being transferred to client accounts that cannot be used to reimburse other creditors in the event of the firm's insolvency (CASS 5.3 and CASS 5.4 provide different means of achieving such segregation). CASS 5.1.5A R permits a firm subject to certain conditions to treat money which it collects as agent of an insurance undertaking as client money; the principle of strict segregation is, however, satisfied because such undertakings must agree to their interests being subordinated to the interests of the firm's other clients.
CASS 5.1.8
See Notes
CASS 5.1.9
See Notes
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CASS 5.2
Holding money as agent of insurance undertaking
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Introduction
CASS 5.2.1
See Notes
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CASS 5.2.2
See Notes
- (1) Agency agreements between insurance intermediaries and insurance undertakings may be of a general kind and facilitate the introduction of business to the insurance undertaking. Alternatively, an agency agreement may confer on the intermediary contractual authority to commit the insurance undertaking to risk or authority to settle claims or handle premium refunds (often referred to as "binding authorities"). CASS 5.2.3 R requires that binding authorities of this kind must provide that the intermediary is to act as the agent of the insurance undertaking for the purpose of receiving and holding premiums (if the intermediary has authority to commit the insurance undertaking to risk), claims monies (if the intermediary has authority to settle claims on behalf of the insurance undertaking) and premium refunds (if the intermediary has authority to make refunds of premium on behalf of the insurance undertaking). Accordingly such money is not, except where a firm and an insurance undertaking have in compliance with CASS 5.1.5A R agreed otherwise, client money for the purposes of CASS 5.
- (2) Other introductory agency agreements may also, depending on their precise terms, satisfy some or all of the requirements of the type of written agreement described in CASS 5.2.3 R. It is desirable that an intermediary should, before informing its clients (in accordance with CASS 5.2.3 R (3)) that it will receive money as agent of an insurance undertaking, agree the terms of that notification with the relevant insurance undertakings.
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Requirement for written agreement before acting as agent of insurance undertaking
CASS 5.2.3
See Notes
- (1) A firm must not agree to:
- (a) deal in investments as agent for an insurance undertaking in connection with insurance mediation; or
- (b) act as agent for an insurance undertaking for the purpose of settling claims or handling premium refunds; or
- (c) otherwise receive money as agent of an insurance undertaking;
- unless:
- (d) it has entered into a written agreement with the insurance undertaking to that effect; and
- (e) it is satisfied on reasonable grounds that the terms of the policies issued by the insurance undertaking to the firm's clients are likely to be compatible with such an agreement; and
- (f)
- (i) (in the case of (a)) the agreement required by (d) expressly provides for the firm to act as agent of the insurance undertaking for the purpose of receiving premiums from the firm's clients; and
- (ii) (in the case of (b)) the agreement required by (d) expressly provides for the firm to act as agent of the insurance undertaking for the purpose of receiving and holding claims money (or, as the case may be, premium refunds) prior to transmission to the client making the claim (or, as the case may be, entitled to the premium refund) in question.
- (2) A firm must retain a copy of any agreement it enters pursuant to (1) for a period of at least six years from the date on which it is terminated.
- (3) Where a firm holds, or is to hold, money as agent for an insurance undertaking it must ensure that it informs those of its clients which are not insurance undertakings and whose transactions may be affected by the arrangement (whether in its terms of business, client agreements or otherwise in writing) that it will hold their money as agent of the insurance undertaking and if necessary the extent of such agency and whether it includes all items of client money or is restricted, for example, to the receipt of premiums.
- (4) A firm may (subject to the consent of the insurance undertaking concerned) include in an agreement in (1) provision for client money received by its appointed representative, field representatives and other agents to be held as agent for the insurance undertaking (in which event it must ensure that the representative or agent provides the information to clients required by (3)).
CASS 5.2.4
See Notes
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