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PS18/2 Client Money & Unbreakable Deposits

January 2018

Depositing Client Money in Unbreakable Deposits

The FCA has this month published a Policy Statement (PS18/2) on depositing client money in unbreakable deposits.

Further to their client money consultation paper in August last year (CP17/29), the FCA have now issued feedback as well as their final rules which come into effect on 22 January 2018.

In the Consultation, the FCA proposed changes to the 30-Day Rule designed to ensure consumers continue to be appropriately protected by firms holding their client money.

Changes to the 30-Day Rule were proposed as the regulator had become aware of a growing number of investment firms experiencing increasing difficulty in depositing client money at banks, believed partly due to the liquidity rules applicable to banks and also the rule within the Client Assets Sourcebook (CASS 7) that prevented firms from placing client money in bank accounts with unbreakable terms of longer than 30 days.

Main Changes:

These newly agreed changes to the FCA’s CASS 7, known as the Client Asset (Term Deposits) Instrument 2018 (FCA2018/2), will enable investment firms to hold a proportion of client money in an unbreakable deposit longer than 30 days subject to certain conditions. Changes to this rule, as result of the consultation feedback, includes allowing firms to deposit an appropriate proportion of client money in 95-day unbreakable deposits.

Risks: Written Explanation Required

The Final Rules in PS18/2 come into force on 22nd January 2018 and require that:

Policy & CASS Resolution Pack

The FCA state that firms must produce a written policy setting out the maximum proportion of client money that would be appropriate for it to deposit in a unbreakable deposit longer than 30 days and the measures it will take to manage the risk of being unable to access client money when required.

It should be noted that this written policy must be included in the CASS resolution pack so that an insolvency practitioner would be able to identify whether the firm places client money in unbreakable deposits of longer than 30 days.

Reporting use of Unbreakable Deposits

Within the final rules, the FCA has moved the requirement to report unbreakable deposits of longer than 30 days in the client money and asset return (CMAR) to SUP16.14. In addition, the regulator has also amended the CMAR guidance to make it clear that firms should report any unbreakable deposit in use at the end of the reporting period.

The amended rules make it clear that firms should report the unexpired term of an unbreakable deposit, where the remaining term is longer than 30 days. The CMAR guidance has also been updated on how unbreakable deposits should be reported by firms and the FCA has included a worked example.

BIPRU Liquidity Requirements for Investment Firms

Firms holding client money that fall under the IFPRU regime are also reminded within PS 18/2 by the FCA of their liquidity risk management obligations under the BIPRU 12 liquidity rules. In particular, when a firm is assessing their potential liquidity resources required from maturity transformation exposure, the FCA informs the amount of liquidity resources would be based on that exposure and would not be based on the amount of client money placed on deposit within the 95-Day unbreakable deposit.

Client Money Support Services

Compound Growth can assist firms of all sizes to ensure they have the necessary procedures in place to remain compliant with the regulator’s rules pertaining to client money and client assets as set out in the CASS Sourcebook.

If you would like to discuss client money or client assets further, please feel free to contact us or email

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