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Client Money & Assets Resolution Pack - Are you Ready?
A key part of the FCA’s review of the client assets regime in the UK is the requirement to create and maintain a Client Money and Assets Resolution Pack also known as CASS RP.
Each firm that is subject to CASS Custody Rules (Chapter) and/or CASS Client Money Rules (Chapter 7) is required to gather certain information regarding its handling of safe custody assets and client money that, in the event of the firm’s failure, would be useful to an insolvency practitioner (IP).
As such, the aim of the rules is to assist with the swift return of safe custody assets and client money compared to the then existing measures.
The majority of firms that hold client assets in the UK are already familiar with the CASS RP requirements, these having been in force since October 2012.
The provisions for CASS RP can be found in Chapter 10 of the Client Assets Sourcebook.
Amongst others, the FCA requires that the CASS RP includes:
As can be anticipated, the contents of the CASS resolution pack will change from time to time, for example, because daily reconciliations must be included in the pack and firms must ensure that it reviews the content of its CASS resolution pack on an ongoing basis to ensure that it remains accurate and that there is formal approval by the governing body for it.
Since the implementation of CASS RP in October 2012, there have been more recent developments with the introduction of similar legislation at a European level.
MiFID II requires that investment firms holding financial instruments or funds belonging to clients make “adequate arrangements” to safeguard the rights of those clients.
In ESMA’s consultation paper last year (May 2014) they note the practical difficulties insolvency practitioners experience in gathering basic information about client money processes and the resultant delay n the return of client money. As such it proposed that firms hold basic information relating to client money and client assets so that it “may be used as an audit trail” and be easily accessed at short notice by a national competent authority, an insolvency practitioner or those responsible for the resolution of a failed firm.
The requirements under this proposal are also consistent with IOSCO’s Principle 1 of their Recommendations Regarding the Protection of Client Assets.
From the proposal, the information firms would be obliged to hold would include:
Largely, ESMA’s proposals look set to reflect those already in force in the UK. However, the requirement to maintain records as if an “audit trail” would appear to require firms to ensure that each component part of the resolution pack is consistently kept up-to-date, rather than be able to trace the history of each such component, and will no doubt prove to be tricky for firms keep on top of.
If you are concerned that your Client Money & Client Assets Resolution Pack may be incomplete, missing core contents requirements and records or if you feel that the frequency of your updates may be inadequate, please get in touch and we would be happy to assist.