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Client Money & Assets Resolution Pack (CASS RP)

A key part of the FCA’s review of the client assets regime in the UK is the requirement to create and maintain a Client Money and Assets Resolution Pack also known as CASS RP.

Each firm that is subject to CASS Custody Rules (Chapter) and/or CASS Client Money Rules (Chapter 7) is required to gather certain information regarding its handling of safe custody assets and client money that, in the event of the firm’s failure, would be useful to an insolvency practitioner (IP).

As such, the aim of the rules is to assist with the swift return of safe custody assets and client money compared to the then existing measures.

The majority of firms that hold client assets in the UK are already familiar with the CASS RP requirements, these having been in force since October 2012.

The provisions for CASS RP can be found in Chapter 10 of the Client Assets Sourcebook.

Amongst others, the FCA requires that the CASS RP includes:

• information on those institutions which they (or through agents or otherwise) have appointed to hold client assets and the accounts at these institutions.
• the firm’s latest reconciliations showing the most up to date information available as to which of those institutions and accounts currently hold client assets
• the names and contact details of individuals holding the relevant client assets information at a third party and instructions
• how to access and use any relevant websites (e.g. service providers include third-party administrators, outsourced parties and affiliated companies of the firm)
• written notification or trust acknowledgement letters
• the most recent internal reconciliations relating to safe custody assets
• the most recent external reconciliations relating to safe custody assets
• the most recent internal reconciliations relating to client money

As can be anticipated, the contents of the CASS resolution pack will change from time to time, for example, because daily reconciliations must be included in the pack and firms must ensure that it reviews the content of its CASS resolution pack on an ongoing basis to ensure that it remains accurate and that there is formal approval by the governing body for it.

Client Assets Resolution: Next Steps CASS RP & MiFID II

Since the implementation of CASS RP in October 2012, there have been more recent developments with the introduction of similar legislation at a European level.

MiFID II  requires that investment firms holding financial instruments or funds belonging to clients make “adequate arrangements” to safeguard the rights of those clients.

In ESMA’s consultation paper last year (May 2014) they note the practical difficulties insolvency practitioners experience in gathering basic information about client money processes and the resultant delay n the return of client money. As such it proposed that firms hold basic information relating to client money and client assets so that it “may be used as an audit trail” and be easily accessed at short notice by a national competent authority, an insolvency practitioner or those responsible for the resolution of a failed firm.

The requirements under this proposal are also consistent with IOSCO’s Principle 1 of their Recommendations Regarding the Protection of Client Assets.

From the proposal, the information firms would be obliged to hold would include:

• Relevant internal accounts and records that readily identify the balances of funds and instruments held for each client (reconciliations, client ledgers, cash books etc.);
• where an investment firm holds client funds (in accordance with Article 18 of the MiFID II Directive), details of the accounts where client funds are held (bank or qualifying money market fund) and the relevant agreements with those entities;
• details of accounts opened with third parties and the relevant agreements with those entities where financial instruments are held by the investment firm in relation to algorithmic trading (Article 17 of the MiFID II Directive);
• details of third parties carrying out any related (outsourced) tasks;
• key individuals of the firm involved in related processes, including those responsible for oversight of the firm’s requirements in relation to the safeguarding of client assets; and
• relevant client agreements.

Largely, ESMA’s proposals look set to reflect those already in force in the UK. However, the requirement to maintain records as if an “audit trail” would appear to require firms to ensure that each component part of the resolution pack is consistently kept up-to-date, rather than be able to trace the history of each such component, and will no doubt prove to be tricky for firms keep on top of.

Client Money & Client Assets Resolution Pack

Assistance with CASS RP: Client Assets Resolution Pack

If you are concerned that your Client Money & Client Assets Resolution Pack may be incomplete, missing core contents requirements and records or if you feel that the frequency of your updates may be inadequate, please get in touch and we would be happy to assist.