Client Money Rules Update

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Client Money Rules Update

18th May 2015

Client Money Rules: CASS Rulebook Changes

Last June (2014) the FCA published a Policy Statement for investment firms holding client money and client assets. The extensive and detailed changes included a rewrite of the FCA’s Client Money Rules and substantial amendments to the CASS Sourcebook.

Policy Statement 14/09 announced a wide range of changes including but not limited to:

custody assets reconciliations;
delivery versus payment exclusion;
recordkeeping and reconciliations; and
acknowledgement of trust letters.

The changes to the Client Money Rules are to have been implemented in three stages with the last of these effective 1st June 2015, next month, with the previous two stages having been implemented from 1st July 2014 and 1st December 2014.

The following table sets out a high-level summary of key changes to the CASS Rules which those affected will need to address by the start of next month.

High-level summary of key changes to FCA CASS Rules:

CASS Rule Implementation: Stage 3 - Effective 1st June 2015

CASS Rule Implementation: Stage 2 - Effective 1st December 2014

CASS Rule Implementation: Stage 1 - Effective 1st July 2014

Policy topic	Date of commencement
Registration of firm and custody assets	01-Jun-15
Depositing assets when using third party custody services	01-Jun-15
Custody recordkeeping, record checks and reconciliations	01-Jun-15
TTCA – procedure for switching	01-Jun-15
DvP window – regulated collective investment scheme	01-Jun-15
Client bank accounts – due diligence and diversification	01-Jun-15
Immediate segregation	01-Jun-15
Physical receipts and allocation of client money	01-Jun-15
Cleared funds	01-Jun-15
Money due to client from firm	01-Jun-15
Prudent segregation	01-Jun-15
Client money relating to custody assets held at a custodian	01-Jun-15
Client money recordkeeping and reconciliations	01-Jun-15
Further consequential changes to the client money distribution rules	01-Jun-15
Non-written mandates	01-Jun-15
Reporting to clients	01-Jun-15
Consequential change to the CMAR and CASS RP	01-Jun-15

Policy topic	Date of commencement	Any transitional
Written custody agreements	01-Dec-14	New rules will not apply to counterparty relationships established before 30 November 2014 until 1 June 2015, unless materially altered
Unclaimed custody assets	01-Dec-14
Unclaimed client money	01-Dec-14	New rules relating to written client agreements will not apply to existing client relationships until 01-Jun-2015
DvP window – commercial settlement system	01-Dec-14	New rules relating to agreement of client will not apply to existing client relationships until 01-Jun-15
Banking exemption	01-Dec-14	New rules relating to client notifications will not apply to existing client relationships until 01-Jun-2015
Transfer of business	01-Dec-14
Alternative approach to client money segregation	01-Dec-14	New rules will not apply to a firm operating the alternative approach on the 30 November 2014 until 01-Jun-2015
Non-standard client money reconciliations	01-Dec-14	New rules will not apply to a firm operating a non-standard method on the 30 June 2014 until 01-Jun-2015
Acknowledgment letters	01-Dec-14	New rules will not apply to existing client bank accounts and client transaction accounts until 01-Jun-2015
Information to clients on safeguarding client assets	01-Dec-14	New rules relating to client disclosures will not apply to existing client relationships until 01-Jun-2015

Policy topic	Date of commencement	Any transitional
CASS 1 application provision	01-Jul-14
CASS 3 application	01-Jul-14
CASS 6 application	01-Jul-14
Multiple client money pools	01-Jul-14
Right to use arrangements	01-Jul-14
CASS 7 application	01-Jul-14
Trustee firms	01-Jul-14
Payment of interest on client money	01-Jul-14
Money ceasing to be client money	01-Jul-14
Unbreakable term deposits	01-Jul-14	New rules apply to new contracts and firms must move to compliant contracts as soon as permitted
Qualifying money market funds	01-Jul-14
Client money held with third parties	01-Jul-14
CFTC Part 30 Guidance	01-Jul-14

High-level summary of key changes to FCA CASS Rules:

Related Reading: