1 June 2015 marks the final stage of the FCA's reform of its client money and custody assets (CASS) rules for investment businesses set out in Policy Statement 14/9, and is the date on which the bulk of the changes in the Policy Statement ('PS') take effect. PS 14/9 was fuelled by the Lehman Brothers case, and followed a series of consultations recommending that the CASS regime needed a substantial overhaul. The new rules have been phased in since last July.
The changes in PS 14/9 (especially those now in force) are far-reaching. Some require 'repapering', i.e. refreshed documents covering bank acknowledgements, client communications and third party arrangements amongst other things. But there are more significant changes to both handling and reconciling client money (CASS 7) and a notably more stringent approach to holding safe custody assets (CASS 6).
The changes will not only affect investment firms themselves. Many such firms require an auditor to determine whether client money and assets were properly handled (a reasonable assurance engagement) or where firms cannot (or claim not to) not hold such money or assets, whether there was any evidence that they in fact did (the limited assurance engagement). So auditors will also need to get to grips with the new regime and ensure their procedures are up to scratch. At Mercia, we support auditors of FCA investment firms and have a Specialist Assignment Manual to ensure that subscribers have up to date guidance and work programmes.
For more information, please contact Jeremy Williams at Mercia.