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Client Assets Regime Consultation CP17/2

25th January 2017

FCA Publishes Client Assets Regime Consultation CP17/2

The FCA has entered into a new consultation this week relating to the Client Assets Regime.  Consultation Paper CP17/2, published on Monday (23 January 2017), seeks feedback on a number of aspects of the client assets regime, most notably in relation to the client money distribution rules and their interaction with the special administration regime (SAR).

• CP17/2 CASS 7A and the special administration regime review

The consultation closes on 23rd February in relation to Chapter 3 proposals on EMIR and MiFIR RTS and in all other proposals on the 24th April 2017.

CP17/2: What does it propose?

Now that HM Treasury has published amendments to the SAR regulations, the FCA’s consultation paper seeks feedback from industry participants on proposed changes to the Clients Assets Regime (CASS) that affects the return of client assets.

This also includes re-consulting upon some CASS 7A changes that were previously consulted upon in Consultation Paper CP13/5 and also explains why certain proposal in CP13/5 and discussed in Discussion Paper DP16/2 are no longer being taken forward.

CP13/5 was published in July 2013 whilst DP16/2 was published in March last year (2016) on the same day HM Treasury published their consultation on proposed changes to the SAR regulations. DP16/2 discussed possible changes to CASS and particularly those to CASS 7A.

Furthermore, this week’s consultation seeks feedback on lesser consequential changes to the client money rules in CASS 7 and CASS 7A to tackle the forthcoming indirect clearing requirements of EMIR and the Regulatory Technical Standards (RTS) of MiFIR.

Whilst the RTS are still in draft form and have not yet been adopted by the European Commission (EC), the FCA advise they will continue to review and make any necessary adjustments to their proposed changes once the RTS are finalised and have been made official.

Next steps for Firms:

The matters discussed in CP17/2 will affect investment firms and their clients in the event of an investment firm failure, as well other types of pooling events.

Thus, CP17/2 is relevant to all regulated firms that hold client money and/or custody assets in relation to investment business and in particular:

• their clients;
• their banks and custodians;
• market infrastructure firms, including central counterparties, exchanges and other intermediaries with whom a firm may place client assets; and
• insolvency practitioners and their advisers.

As mentioned, the consultation closes in relation to EMIR and MiFIR RTS proposals on 23rd February 2017 whilst it remains open to comments on all other proposals until 24th April 2017.

Once the FCA has considered the feedback received from CP17/2, they will aim to publish a Policy Statement and final rules in the summer.

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