CASS Consultation Paper

The FSA has released Consultation paper CP10/9 – “Enhancing the Client Assets Sourcebook”.

Proposals include greater transparency requirements by UK authorised prime brokers (‘PBs’) in respect of re-hypothecation provisions by way of a summary annex (the CP refers to “… sophisticated clients’ lack of understanding …”).

Additionally PBs will have to offer clients a daily statement detailing the assets and monies held; the location of safe custody assets; and a list of institutions where client money is held. Other proposals include a restriction on the amount of client monies that can be held in client money bank accounts within a group.

We also see the introduction of yet another new Controlled Function: CF10A, the CASS oversight function. However for firms holding less that £1m client money/£10m safe custody assets it will be deemed that a person approved to perform a governing function (for this purpose this means CF1 or CF3 or CF4) and who is also appointed to carry out the CASS oversight function will not have to be specifically approved for the latter.

In recognition of the importance that the FSA is now placing on client assets there will be a new return that will need to be submitted to the FSA (see Annex 4 of the CP for an example). Should the proposals go ahead the relevant changes to the FSA Handbook will be phased in in 2010 and 2011.

The consultation period ends 30 June.