The Financial Conduct Authority recently responded to questions around Client Assets (CASS), in relation to the current disruption caused by COVID-19 pandemic.
Aside from outlining their own position on relevant issues, they also summarised the key concerns firms have into seven areas including handling cheques, audit reports and performing reconciliations.
1. Handling Cheques
In regards to issues handling cheques, (e.g. when cheques are delivered to "un-manned" offices) the FCA have asked firms to consider the harm caused on a case-by-case basis. As well as keeping clear lines of communication with their clients in the event that client money is not paid into a client bank account promptly.
Although there are logistical issues that may prevent this, firms must show that they have endeavoured to mitigate these risks, ensuring that client assets are protected.
2. CASS Audit Reports
Although there have been concerns that the current situation could lead to further breaches and therefore an increase in cost for the CASS audit, the FCA have not seen evidence of this.
In the event that firms are not able to submit their CASS audit within the four month deadline, they should then refer to the "late reporting rules" in SUP 3.10.18.
Most importantly, if the audit firm becomes aware any significant matters that could affect the firms CASS compliance, they should notify the FCA by emailing CASSaudit@fca.org.uk
3. Physical Asset Reconciliations
The FCA reminds firms that if they are faced with a situation in which they are not able to conduct physical asset reconciliations, under CASS 6.6.57 R (5) they are required to notify the FCA as soon as possible. Otherwise, they should continue to follow the rules outlined in CASS 6.6.22 R.
4. Depositing Client Money
Having recognised that an increase in client money holdings could lead to operational challenges, (especially regarding meeting segregation and diversification requirements) The FCA has reminded firms that under CASS 7, accounts can be opened at central banks, CRD credit institutions, banks authorised in a third country and qualifying money market funds.
The FCA also highlighted that if firms are experiencing challenges in being able to segregate money, they should assess all options available before contacting them.
5. Notification of CASS breaches
As fundamental components of the regime, firms must continue as required and notify the FCA of CASS breaches under Principle 11 and SUP 15.
6. CASS Firm Classification
This will continue as planned and firms must notify the FCA of their categorisation in January.
7. Delays To Improvement Programmes
Acknowledging that some firms may be experiencing delays in planned improvement programmes, the FCA has instructed firms to notify them of such delays and keep the FCA updated with their progress.
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