Sun. Sep 27th, 2020

Planet Compliance

Innovation & Regulation in Finance

FCA launches consultation on client assets regime

2 min read

The FCA today has published a discussion paper (“DP16/2: CASS 7A and the Special Administration Regime Review”) on a number of aspects of the client assets regime, in particular regarding the client money distribution rules (CASS 7A) and their interaction with the Special Administration Regime (SAR).

According to the FCA, if an investment firm holding client assets fails, its client estate is generally dealt with by the relevant insolvency practitioner in accordance with CASS 7A and the SAR. These two regimes work together to ensure that client assets are returned to their owners as soon and as intact as possible following the failure of an investment firm.

HM Treasury commissioned Peter Bloxham to undertake an independent review of the SAR. The Bloxham Final Report was published in January 2014 and contained a number of recommendations relating to the SAR regulations, the CASS rules and the procedures administrators follow in the event of an investment firm failure.

This discussion paper sets out our response to the recommendations in the Bloxham Final Report addressed to the FC and seeks industry views on the discussion points raised. The recommendations aim to improve the speed of return of client assets to an investment firm’s clients in the event of its failure and minimise the market impact of its entry into special administration. This discussion paper also contains the regulator’s response to the ‘speed proposal’ on which it consulted in CP13/5: Review of the client assets regime for investment business, but which was separated from the FCA’s final proposals in PS14/9: Review of the client assets regime for investment business, pending the Treasury’s response to the Bloxham Final Report.

This paper is relevant to all regulated firms that hold custody assets and/or client money in relation to investment business and in particular:

  • their clients
  • their banks and custodians
  • administrators and their advisers

The topics discussed in this discussion paper will affect investment firms and their clients in the event of an investment firm failure and the FCA welcomes feedback from consumers and consumer groups on the discussion points. The deadline for comments is 9 May 2016. The FCA statement together with the Discussion Paper and related information can be found here.

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