In March 2008 the FSA published Consultation Paper 08/6: Review of the Client Assets sourcebook (CP08/6). In CP08/6 the FSA set out proposals for reforming the Client Assets sourcebook (CASS) following the implementation of the Markets in Financial Instruments Directive (MiFID).
The FSA’s aim in CP08/6 was to simplify CASS’s structure, increase the flexibility available to firms by moving to more principles-based regulation and, where possible, provide a common platform for firms based on the MiFID standards.
The FSA has now published Policy Statement 08/10: Client Assets sourcebook (Common platform provisions) Instrument 2008 - Feedback on CP08/6 and made rules (PS08/10). In PS08/10 the FSA summarises the comments made on CP08/6 and its responses, along with made rules which will come into force on 1 January 2009.
In PS08/10 the FSA reports that the approach in CP08/6 was broadly welcomed by industry. As a result the FSA has:
- Deleted rules and guidance where justified by cost-benefit analysis.
- Simplified the wording in CASS by adopting a plain English style.
- Reduced any significant undue burdens on firms.
Within this approach the FSA has also maintained carve-outs for non-MiFID scope firms regarding affiliated companies and approved banks.
There are two areas where the FSA has not followed its proposals in CP08/6. These relate to non-MiFID scope business carve-outs for the ‘approved bank’ exemption and affiliated companies’ provisions. In CP08/6, the FSA proposed to move non-MiFID scope business to the MiFID standard. This would have altered the ‘approved bank’ definition to ‘credit institution’ and required that affiliated companies be treated as any other client of the firm. In contrast with its proposals and consistent with industry feedback received, the FSA has decided that it will retain the non-MiFID business carve-outs for approved banks and affiliate companies.
PS08/10 has three parts which are:
- Part 1 provides an overview of the review of CASS.
- Part 2 sets out the feedback the FSA received on CP08/6 and the FSA’s response.
- Part 3 summarises the discussion surrounding CASS 5, dealing with insurance mediation activity.