SECTION 9

Question 1

What is the purpose of client money and custodary rules?

Answer 1

The fiduciary duty to provide adequate protection for client money.

Question 2

What are CASS 6 and CASS 7 respectively?

Answer 2

Custody rules for all business, and client rules for MIFID business with opt-in for non-MiFID business.

Question 3

Segregation of assets

Answer 3

For client money held in an approved bank and identified as separate from the firm’s
money

Question 4

Client asset reconciliations

Answer 4

• Reconcile records of client asset balances
  • As often as necessary
• Shortfalls corrected as soon as possible
  • This is close of business on the day of reconciliation for client money held by the firm
• A firm must write to the FCA if they are unable to reconcile

Question 5

Exemptions of client asset reconciliations include:

Answer 5

ICVC and UCITS schemes

• Incoming EEA firms (other than insurers)
• BCD credit institution
• Coins held for the value of the metal
• Money held for delivery versus payment (DvP)
• Money due and payable to the firm

Question 6

CASS audit

Answer 6

Required annually and submitted to the FCA within four months of the audit

• Client asset assurance standard set by the Financial Reporting Council
• Firm to explain any breach identified

Question 7

CASS right of use

Answer 7

• Where the right to use a client’s assets is transferred to the firm
  • Rehypothecation
  • Right-to-use clause

Question 8

CASS resolution pack

Answer 8

Specific documents and information relating to client money and assets
• Must be available to the regulator on request

Question 9

Mandate accounts

Answer 9

Where a client gives a firm control over their assets or liabilities
• e.g. direct debits, pre-approved companies with PayPal
- Firms must establish and maintain adequate records and controls

Question 10

Right of use and TTCA

Answer 10

If client assets are placed into the control to the firm (e.g. used as collateral for a loan), the firm and the client must have a proper ‘right of use’ agreement in place. Such an agreement is called a ‘title transfer collateral agreement’ (TTCA).

Question 11

CASS Mandates

Answer 11

The FCA has defined a mandate as ‘any means that give a firm the ability to control a client’s assets or liabilities’.
A mandate is required from the client when the client is giving the firm control over their assets and/or liabilities. A mandate is required if a firm is undertaking designated investment business (including MiFID business), insurance mediation activity (except if it relates to a reinsurance contract) and debt management activity. In most instances, the mandate will be provided to the firm through the firm’s terms of business. Where a client has a mandate with a firm over the control of their assets held at a third party, the client money (CASS 7) and custody rules (CASS 6) will not apply. The mandate rules require firms to establish and maintain records and internal controls to prevent any misuse of the mandate authority granted by the client.