Client assets supervision: classification, CF10a, CMAR

When looking at the UK’s Financial Conduct Authority’s (‘FCA’) rules I always like to start from their overarching Principles for Business (PRIN) Sourcebook. Principle 10 of the FCA’s Principles for Businesses requires a firm to arrange adequate protection for assets when the firm is responsible for them. This applies to client money as well as clients’ custody assets.

In this note, we will explore the rules governing how Financial services firms that are permitted to hold client money and safe custody assets are required to comply with the detailed rules and guidance set out in the FCA’s Client Assets sourcebook (CASS).

I must stress from the outset that CASS only seeks to mitigate these risks, and at no point does it expect all risk of client asset loss to be eliminated. The rules provide a mechanism so that money belonging to a client is protected, to the maximum practical extent, from the insolvency of a firm and, if such an event does occur, it is returned to the client as swiftly as possible. This is achieved, fundamentally, by requiring that firms keep all client money separate from the firm’s money, by preventing firms from using client money for their own purposes and by ensuring that firms maintain accurate and up to date records of the client assets they hold.