CASS Anatomy

What is client money?

Banks

Deposit-taking credit institutions benefit from the general “banking exemption” from the obligation to hold money on behalf of clients subject to the client money rules. A bank may hold cliient money as banker and not trustee.

Delivery versus payment

Note that transactions that are settled DVP do not usually involve the holding money on a client's behalf at all: (instead the client would be paying the broker either as its contractual counterparty, where the broker acts as principal, or in settlement of the client's obligation to reimburse the broker for moneys it jhas already disbursed on the client's behalf (in acquiring the stock in the first place), where the broker acts as agent).

Even without the general banking exemption, the obligation to hold fclient money only arises after a certain period (generally longer than the period for which a broker would expect to be holding money in case)

There are specific exemptions from the obligation to hold as client money relating to delivery versus payment transactions.

This is an anatomy of the CASS Rules in the FCA Sourcebook.

1 - Application and General Provisions

1.1 Application and Purpose (General)
1.2 General application: who? what?
1.3 General application: where?
1.4 Application: particular activities
1.5 Application: electronic media and E-Commerce

1A - CASS firm classification and operational oversight

1A.1 Application
1A.2 CASS Firm Classification
1A.3 Responsibility for CASS operational oversight

3 - Collateral

3.1 Application and Purpose
3.2 Requirements

5 - Client money: insurance mediation activity

5.1 Application
5.2 Holding money as agent of insurance undertaking
5.3 Statutory trust
5.4 Non-statutory client money trust
5.5 Segregation and the operation of client money accounts
5.6 Client money distribution
5.7 Mandates
5.8 Safe keeping of client's documents and other assets
5 - Annex 1 Segregation of designated investments: permitted investments, general principles and conditions

6 - Custody rules

6.1 Application
6.2 Holding of client assets

6.2.1 Requirement to protect clients' safe custody assets

6.2.2 Requirement to have adequate organisational arrangements

6.2.3 Registration and recording of legal title

6.2.4 (Nominee companies)

6.2.5 Recording title to safe custody assets

6.2.6 (Adequate investigations)

6.2.7 (documents of title to bearer assets)

6.3 Depositing assets and arranging for assets to be deposited with third parties

6.3.1 - Criteria for depositing assets with a third party

6.3.2 - Considerations when discharging obligations under this part

6.3.3 - Issues firms should address in their agreements with third party custodians

6.3.4 - Suitable jurisdictions for the deposit of safe custody assets

6.3.4A - Third-party custody agreements

6.3.4B - Third-party custody agreements

6.3.5 - Agreements with third party custodians not to contain security interests ...

6.3.6 - ... er, except in the following cases

6.3.7 - When a firm is considered to be acting on the instructions of a professional client

6.3.8 - Safe custody asset includes client money

6.3.9 - And don't think this provision allows a right of set-off

6.4 Use of safe custody assets
Template:CASS Section 6.5 TOC 6.6 Template:Records, accounts and reconciliations (From 1/6/2015)

6.6.54 Treatment of shortfalls

7 - Client money rules

7.1 Application and Purpose

Banking exemption: 7.1.8A | 7.1.8B

Template:CASS Section 7.2 7.3 Organisational requirements: client money
Template:CASS Section 7.4 7.5 Transfer of client money to a third party
7.6 Records, accounts and reconciliations
7.7 Statutory trust
7.8 Notification and acknowledgement of trust
7.10 Application and purpose

7.10.3 Opt-in to the client money rules

7.10.8 Money that is not client money

7.10.9 Professional client opt-out

7.10.11 Opt-outs for non-IMD business

Credit institutions and approved banks

7.10.16 R The banking exemption

7.10.17 G

7.10.18 G

7.10.19 R Disclosure required where held under banking exemption

7.10.20 R Disclosure required where money ceases to be held under banking exemption

7.10.21 G

7.10.22 R

7.10.23 G

7.10.24 R

7 - Annex 1

7A Client money distribution

7A.1 Application and purpose
7A.2 Primary pooling events
7A.3 Secondary pooling events

Failure of a bank, intermediate broker, settlement agent or OTC counterparty: secondary pooling events:7A.3.1 | 7A.3.2 | 7A.3.3

Failure of a bank: 7A.3.4 | 7A.3.5

Failure of a bank: pooling: 7A.3.6 | 7A.3.7 | 7A.3.8 | 7A.3.9 | 7A.3.10 | 7A.3.11 | 7A.3.12

Client money received after the failure of a bank: 7A.3.13 | 7A.3.14 | 7A.3.15

Failure of an intermediate broker, settlement agent or OTC counterparty: Pooling: 7A.3.16 | 7A.3.17

Client money received after the failure of an intermediate broker, settlement agent or OTC counterparty: 7A.3.18

Notification to the FCA: failure of a bank, intermediate broker, settlement agent or OTC counterparty: 7A.3.19

8 - Mandates

8.1 Application
8.2 Definition of mandate (Comes into force on 01/01/2013)
8.3 Records and internal controls (Comes into force on 01/01/2013)

9.0 - Prime brokerage

9.1 Application
9.2 Prime broker's daily report to clients
9.3 Prime brokerage agreement disclosure annex
9.4 Information to clients concerning custody assets and client money

Schedule: Transitional Provisions and Schedules

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