CASS & a New Operational Oversight Function

There are big changes to CASS coming up which include a new control function and the need to complete a Client Money and Asset Return (‘CMAR’),

As mentioned in Regulatory Roundup 11, the FSA are introducing a ‘CASS operational oversight function'(CF10a) which is the operational role of ensuring that the appropriate client assets and client money protections are actively being achieved by the firm in the course of its business. Firms should apportion this role by 1 Jan 2011.

However small firms (CASS 1A.2.7 defines a CASS large, medium and small firm) have been given much less burdensome requirements following this date – application to the FSA for the role of ‘CF10a’ will not be necessary for small firms as the CF10 will (by default unless the firm nominates another person) take on this responsibility.

The FSA will email all firms (with relevant investment business and client assets permissions and requirements) for details of client money/assets held and the name of the individual responsible for CASS oversight. Firms will be emailed from the CASS Sector informing them of the requirement to submit a CMAR.

Large and medium CASS firms will be under a monthly obligation whilst small CASS firms will be required to submit a half-yearly CMAR within 15 business days of 30 June 2011 and 31 December 2011 (the return is based on the calendar year and not a firm’s accounting reference date). The first report due in July 2011 will only need to cover the period from 1 June 2011 to 30 June 2011.

Other changes impact upon firms providing prime brokerage services(see CASS 9) and restrictions placed upon funds deposited or held within a group(see CASS 7.4.9).

Rule changes, including an example of the new CMAR, are contained in PS 10/16 – ‘Client Assets Sourcebook (Enhancements) Instruments 2010’. The paper also reminds us that the FSA launched a specialist CASS Sector unit in June to increase its focus on the regulation of client assets.

The various changes come into force on different dates. Firms should refer to the table in Annex 2 of PS10/16 for a useful summary.