Dear CEO General Insurance Intermediaries Client Money Arrangements

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  • Commission must not be withdrawn before the account has been reconciled;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.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

This is a welcome step by the regulator in its quest to protect consumer assets.

Action Required By You

If you hold client money, review the letter and the CASS rules and ensure you are following them.
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About the Author

Mike is a Chartered Financial Planner and a Fellow. He has been an ATEB consultant for over 10 years but has worked in financial services for a great deal longer. He has a wide breadth of experience covering banking and lending, home finance, pensions, investments, consumer credit and general insurance.

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