Client Money and Assets

Still more to do …

Bovill Briefing

March 2015

Richard Scrivener

2

The final hurdle?

Key dates – PS 14/9

3

1st July 2014

Limited, immediate changes not

requiring significant lead time or

infrastructure changes

1st December 2014

Requirements around the provision

of information to, or obtaining the

agreement of new clients and

documentation standards with any

new counterparties.

1st June 2015

Implementation of all new rules,

including new contract wording for

all clients

• Name matters!

• Keep firm assets entirely separate

• UNLESS facilitating a client transaction

Registering client assets

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Rule ref: CASS 6.2.3R-CASS6.2.6G

• Selecting

• Appointing

• Periodically reviewing

• Due diligence is key!

• Don’t just rely on one source of information

Appointing a custodian

5

Rule ref: CASS 6.3.1R – CASS 6.3.4A-1R

• Wholesale changes

• Internal records – separate from records held by

external parties

• Records of reconciliations

• Policies and procedures

• Minimum reconciliation frequency

Custody reconciliations (1)

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• Changes to available methods – internal custody

reconciliation method or internal system evaluation

method

• Separate physical reconciliations

• External reconciliations

• Dealing with shortfalls

Custody reconciliations (2)

7

Rule ref: CASS 6.6

• More detail – methods that can be used

• Record keeping –

• Reconciliations carried out

• Rationale for the chosen frequency of

reconciliations

Reconciling client money

8

Rule ref: CASS 7.15 and CASS 7.16

• How do you treat title transfer collateral arrangement

requests?

• Record keeping is key

• Dealing with the transfer

• Treatment of assets afterwards

Title Transfer Collateral Arrangements

9

Rule ref: CASS 6.1.8AR – CASS 6.1.8EG and CASS 7.11.1R – CASS 7.11.13G

• Amended rules

• Now includes authorised fund managers

when settling transaction relating to units in a

regulated fund

• Remember – client agreement needed!

Delivery versus Payment

10

Rule ref: CASS 7.11.14R – CASS 7.11.24R

• More robust requirements

• Periodic assessment of diversification

• Periodic review of due diligence on bank

Due diligence on banks

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Rule ref: CASS 7.13.8R – CASS 7.13.11G

and CASS 7.13.20R – CASS 7.13.25R

• Receive straight into client account

• Timescales for banking of physical receipts

• Securing physical receipts before banking

• Future dated cheques

Segregating client money

12

Rule ref: CASS 7.13.3R – CASS 7.13.7G

CASS 7.13.32 – CASS 7.13.38G

• Not using client money for own account – more!

• Don’t use one client’s money to fund another’s

transaction

• Monitoring clearing is key

Organisational requirements

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Rule ref: CASS 7.12.3G

• Will it impact more firms?

• Do you need to use prudent segregation?

• If so – policy, Board sign off, implementation and

monitoring are key

• Record keeping

Segregating prudently

14

Rule ref: CASS 7.13.41R – CASS 7.13.53R

• New rules

• What happens to money generated from safe

custody assets deposited with a third party?

• Client account or client transaction account

• Dividends etc

Client money from safe custody assets

15

Rule ref: CASS 7.14.5G to 7.14.9G

• New templates

• Make sure terms of business don’t conflict

• Need to remember to review and update

periodically

Acknowledgement letters – existing business

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Rule ref: CASS 7.18, Annex 2R, Annex 3R,

Annex 4R and Annex 5G

Questions?

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Take aways

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• As always – the creation and retention of records is

paramount

• Increased operational demands

• Ongoing review of existing controls and processes

• IT requirements, governance arrangements, policies

and procedures