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Cold towels and coffee

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I spent most of this morning attempting to read and absorb the FCA’s PS14/9 Review of the client assets regime for investment business: Feedback to CP13/5 and final rules.

I say attempting because, at 410 pages long and packed with the kind of industry jargon that makes you want to run screaming from the room, this paper is not for the faint hearted. I counted one sentence with 58 words and no punctuation. And at 63 pages long in its own right, Chapter 7 (detailing the specific changes to the Client Money regime) actually made me want to cry.

For firms that handle client money and assets, I imagine that procrastination and desk tidying currently abound. There is far too much in the paper to summarise in any detail here. The FCA’s own press release doesn’t try to attempt it either so I don’t feel too bad about that. But let’s do a comically brief summary instead.

The new rules represent a tightening up of the whole CASS regime, including:

  • stricter segregation requirements for client money and assets overall, based around the underlying principle of ‘immediate segregation’
  • that includes the introduction of specific and relatively tight time limits for situations where firms are otherwise allowed to suspend segregation for operational reasons
  • stricter requirements for documenting agreements with custodian banks, including the introduction of FCA prescribed template agreements
  • stricter record keeping requirements overall and prescribed operational processes for checking that those record keeping requirements are being complied with
  • some enhanced disclosure requirements for clients, including around the payment of interest (or not) as the case may be, on client money
  • a ban on putting client money into ‘unbreakable term deposits’ (UTDs) with a term of anything longer than 30 days – to stop a practice that has developed amongst some firms of putting client money into longer term UTDs to maximise interest rates
  • clarification of permitted and expected processes in some areas, for example when dealing with apparently orphaned client money or assets or when transferring client money and assets from one business undertaking to another.

Recently, the FCA has been brilliant at producing things like summary videos and infographics to help people get to grips with key policy changes and the associated actions they will need to take. This paper feels like an EXCELLENT candidate for that sort of treatment.

If anyone from the FCA is reading, please. We beg you.

In the meantime, it’s going to be cold towels and coffee all round as various terms and conditions documents and operational process manuals are taken down from shelves for review.

Let us know if you might need a hand rewriting them. It’s one of our favourite kinds of challenge at the lang cat. We’re a bit strange that way.

PS – a follow-up consultation on some changes to the client money rules for NISAs was published today (11 June). This proposes that:

  • all cash held in Stocks & Shares ISAs should be held as client money (whether or not it is being held for the purpose of onward investment)
  • that Cash ISA providers who are not also deposit takers should be able to opt into the client money regime for the cash held in their ISAs
  • and last, but not least, that ISA cash should be carved out of the upcoming ban on client money being held in Unbreakable Term Deposits of longer than 30 days.

Only two weeks to respond to this consultation people, so get your skates on if you have strong views.

Posted in: #regulation   #Uncategorized  

About Gareth Thompson

Our regulatory expert. Also an experienced communicator and writer. Loves turning highly complex technical and legal documents into something her Mum might read. Relentless coffee lover and proud owner of Buster, the #langdug