Safeguarding Client Assets Intro
26th February 2020
Following the 2008 financial crash, during which many people struggled to recover the funds they had invested, the Financial Conduct Authority added new guidance to help protect clients from financial losses, and to encourage financial service companies to recognise their responsibility and take steps to protect client assets.
Client asset rules
After the financial crash, regulators recognised a need to tighten the rules surrounding how firms manage and protect their clients’ assets.
The Financial Conduct Authority (FCA) added new guidance to the Client Assets Sourcebook (CASS). The new rules dictate that:
- A trust is created when a firm receives money from a client, not when the money is segregated into client accounts
- When a firm fails, all client money should be pooled, regardless of whether it was in designated client accounts
- All clients with a contractual entitlement to client money protection are entitled to participate in the client money pool (even if their money was not segregated)
These rules apply to any firm that controls, holds or manages the assets of their clients. This typically includes brokers, investment banks, custodians, hedge funds and peer-to-peer lenders.
Firms that hold client assets are obliged to:
- Identify risks
- Assess risks
- Reduce risks.
All firms must make an annual notification about the money and assets they hold on behalf of their clients.
This helps to determine your size classification:
- Small firms: Money held is less than £1 million; assets held are less than £10 million
- Medium firms: Money held is between £1 million and £1 billion; assets held are between £10 million and £100 billion
- Large firms: Money held is more than £1 billion; assets held are more than £100 billion
Firms that are considered medium or large, according to the value of client assets held, are obliged to complete a monthly report on their holdings.
If your firm holds client money equal to or exceeding £1m, or assets worth more than £10m, then you must complete a monthly Client Money and Asset Return (CMAR) using the Gabriel online system.
The CMAR report is a legal requirement, but it can also be a useful business tool as it can help your firm understand the firm’s CASS position.
Safeguarding Client Assets e-learning from Marshalls
Does your firm manage client assets?
Our new Safeguarding Client Assets e-learning course is a four-part introduction to the concept of client assets, how they should be handled, the impact of the regulations and consequences of non-compliance, as well as a knowledge test to confirm the learner’s understanding.
This 30-minute course is ideal for firms that need to adhere to the CASS regulations.
You can either select this course as a CPD-certified off-the-shelf package, or we can customise the content to suit your own firm’s requirements.
To learn more about our Safeguarding Client Assets course, or to discuss your institutions needs get in contact here.