Client background 

Our client was a financial services company that offers wholesale broking and prime broking services.

The challenge 

Further to correspondence with the Financial Conduct Authority (FCA) the client was informed that they required permission to hold and control client assets. The client had not previously needed to comply with the client assets rules; as such, there was only limited expertise within the firm. The client was holding both clients’ money and securities as collateral and in a number of cases would settle a transaction free-of-payment. The client also needed us to articulate how their existing processes could be adapted to comply with the Clients Assets Source Book, rather than designing processes from a blank sheet of paper.

Our approach and contribution 

Working in close partnership with one of the firm’s senior project managers, the compliance officer and operations team we:

• Conducted a detailed gap analysis to the FCA’s Client Assets Source Book (“the CASS rules”).

• Provided the client with a structured report that was traceable back to the CASS rules, with recommendations as to how to adapt their existing processes and in so doing close the gaps.

• In preparing the document we took the client on an educational process explaining, with examples, how the recommendations could be implemented in practical terms.

• Provided insights as to how the Client Assets Audit would work in practice and discussed how the requirement to create the CASS Resolution Pack and CASS Risk and Controls Map could be implemented in a relatively short period of time.

• Drafted the Client Assets Policy and took the client through each policy statement in detail so that they were left with capability to implement processes and procedures to support each policy statement.

• Provided high level guidance on the outsourcing requirements, should the firm wish to outsource certain aspects of the process.

• Provided detailed guidance on the concept of prudential segregation and supported the creation of a distinct prudent segregation policy.

• Provided detailed guidance on how the client money and custody assets internal and external reconciliations should work in practice.

The outcome 

As a result of our engagement, the client:

• Acquired significantly more expertise as to how to hold and control client assets.

• Gained sufficient understanding of the CASS Rules to have a meaningful conversation with the regulators on the subject.

• Was able to take a risk-based decision as to the investments required to comply with the CASS Rules.

• Was able to take forward their variation of permission based on sound policies and procedures.