The following Financial Services guidance note provides comprehensive and up to date legal information covering:
The rules governing how a firm must safeguard and handle client money held in relation to its investment business are found in chapter 7 of the Clients Assets sourcebook (CASS 7), which forms part of the Financial Conduct Authority’s (FCA) Handbook. These rules provide more detail on the FCA's overarching requirement in Principle for Business 10 that 'a firm must arrange adequate protection for clients' assets when it is responsible for them'.
This Practice Note describes what does and does not amount to client money, the requirements contained in CASS 7 to pay client money into particular accounts, the need for segregation of that money, and for due diligence in relation to the entities with whom it is placed. It does not cover the way in which client money will be distributed on the event of a firm's insolvency (or 'pooling event'). These issues, which are dealt with by the rules in CASS 7A, are covered in Practice Note: Client money distribution and transfer.
The collapse of Lehmans highlighted how essential it is that firms adequately record the client assets they hold and effectively segregate them in accordance with CASS. However, as the FCA pointed out in its Business Plan 2013/14, the FCA's supervisory work has shown
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