Following a series of financial resilience surveys and a letter issued in September last year the FCA has issued a Dear CEO letter about adequate client money arrangements, that can be accessed here.
The FCA is keen to ensure client money is adequately protected, that firms follow the CASS 5 rules and review arrangement in place.
Some key points and reminders are listed below:
- A firm cannot outsource its responsibility for compliance, and is responsible at all times for the protection of its customer’s client assets – however the FCA does state that “if you feel that you need additional support to fully understand the client money requirements applicable to your firm, you may find external advice useful;
- Client money calculations must be carried out at least every 25 business days;
- CASS 5.5.65R – CASS 5.5.68R specifies how firms should calculate their client money resource and their client money requirement, using either the client balance or accruals method;
- They confirm timing and that the firm must reconcile calculation with bank account;
- Commission must not be withdrawn before the account has been reconciled;
- Firms holding client money must segregate it from own money in a trust account and title the account accordingly with the term “client bank account” together with accurate acknowledgement letters for each;
- Risk transfer money held in a client money account is subject to the client money rules;
- If a firm hold money under a risk transfer arrangement there must be an agreement in place that satisfies FCA rules;
- Firms that operate a non-statutory trust account, or that hold over £30,000 in a statutory trust account, must arrange an external audit and carry out due diligence on the auditor.