FCA makes CASS changes: FCA has published its policy statement and final rules following its review of the client asset regime for investment businesses. It is making many of the changes it proposed, but is not proceeding with its proposals on client money distribution rules and will consult again on these later this year. The changes it has made to the Client Assets Sourcebook (CASS) include:

  • to CASS 1 to clarify application of CASS to affiliates and trustee firms;
  • to CASS 3 to remind firms of their obligations under the client's best interest rule when agreeing to a collateral arrangement;
  • to CASS 6 to:
    • clarify which rules apply to depositaries of alternative investment funds (AIFs) and when a firm is arranging safeguarding and administration of assets;
    • limit firms' ability to register firm assets and custody assets in its own name;
    • clarify the rules around depositing custody assets when using third parties;
    • require firms to have in place written agreements when they place custody assets with third party custodians;
    • remind firms of the client's best interest rule when agreeing a right to use agreement with a retail client; and
    • update the rules on record keeping;
  • to CASS 6 and 7 in respect of:
    • written agreements and procedure for switching in relation to title transfer collateral arrangements;
    • the delivery versus payment exclusion for commercial settlement systems; and
    • unclaimed client money and custody assets;
  • to CASS 7 to make several clarifications and amendments including:
    • clarifying the exemption available to banks;
    • disapplying the client money distribution rules to money held by a trustee firm and allowing trustee firms to opt in to certain client money rules;
    • clarifying when money ceases to be client money and the consequences;
    • requirements on assignments and transfers of client money;
    • new rules on due diligence and diversification when selecting banks;
    • immediate segregation of client money except where firms are using the alternative approach;
    • rules on prudent segregation and the alternative approach to client money segregation;
    • requirements where client money is held at third parties or client money relating to client assets held with a custodian;
    • record keeping and reconciliations;
    • auditor assurances;
    • template acknowledgement letters with third parties and requirements for their use; and
    • guidance on the use of the Commodity Futures Trading Commission (CFTC) Part 30 exemption;
  • to CASS 7 and 7A to permit clearing member firms of CCPs to offer multiple client money sub-pools in relation to net margined omnibus client accounts at CCPs;
  • to CASS 8 to ensure firms keep proper records of mandates, whether written or not; and
  • to CASS 9 in respect of reporting to clients on both client money and client assets.

The changes will take effect at various times. Some take effect from 1 July, mainly the clarificatory rules. Many take effect on 1 December, including those on provision of information, with all other rules taking effect on 1 June 2015. The changes are wide ranging and affect all of CASS. The policy statement includes a table setting out the commencement dates for all changes. (Source: FCA Makes CASS Changes)

FCA creates consumer credit research page: A new page on FCA's website gives details of the research it has done on specific parts of the credit market. It has published in-depth research on:

  • credit cards;
  • debt management;
  • logbook loans; and
  • overdrafts.

(Source: FCA Creates Consumer Credit Research Page)

FCA speaks on HFT: Martin Wheatley has spoken on high frequency trading (HFT). He discussed the scope of the term, and how to assess the potential benefits against costs. He then focused on the UK's policy, which will be informed by the EU's policy. He mentioned:

  • market making agreements, which will impose liquidity provision requirements;
  • broader measures, such as authorisation of HFT traders, that give regulators a better overview of the marketplace; and
  • regulation of fee structures, data publication and caps on permitted levels of dark trading.

He explained the importance of supervision, and how FCA is working with the HFT firms active in the UK, and then considered how regulators should properly survey the HFT markets. Separately, he spoke on the challenges technology brings to the industry and regulation. (Source: FCA Speaks on HFT and FCA Speaks on the Technology Challenge)

FCA publishes quarterly consultation: FCA's latest quarterly consultation proposes changes to:

  • the Training and Competence Sourcebook (TC) to add six new qualifications;
  • the Consumer Credit Sourcebook (CONC), largely to clarify parts of the current rules. There are also some minor changes to the Banking Conduct of Business Sourcebook (BCOBS), the Supervision Manual (SUP) and the Perimeter Guidance manual (PERG);
  • SUP in respect of persistency reports, annual report and accounts and product sales data reporting, mainly to integrate reporting requirements into GABRIEL;
  • the Decision Procedure and Penalties Manual (DEPP) and Enforcement Guide (EG), and also to notification requirements to FCA in respect of changes to implement the Immigration Act when it comes into force later this year. The Act will ban credit institutions from opening current accounts for persons who do not have leave to remain in the UK;
  • require further reporting fields for insurers in relation to employers' liability registers; and
  • the Collective Investment Schemes Sourcebook (COLL) to reflect revisions to the Statement of Recommended Practice in respect of authorised funds.

FCA asks for comment on the changes to TC by 6 July, and on all other proposals by 6 August. (Source:FCA Publishes Quarterly Consultation)

FCA consults on client money in ISAs: FCA is consulting on changes to its rules to require all moneys investment firms hold within stocks and shares Individual Savings Accounts (ISAs) that be held as client money. It needs to make the change because of changes announced in the Budget which would allow individuals to use the ISAs for both deposit and investment purposes. Without the change, firms would have to separate client money from non-client money within the ISA wrapper. It asks for comment by 25 June because the ISA changes will take effect from 1 July. (Source: FCA Consults on Client Money in ISAs)

FCA publishes Remuneration Code information: A new page on FCA's website summarises the requirements of the Remuneration Codes and links to its guidance for firms covered by each of chapters 19A, B and C of the Senior Management Arrangements, Systems and Controls Sourcebook (SYSC). (Source: FCA Publishes Remuneration Code Information)

FCA looks at settlement and mediation: A new page on FCA's website looks at how its settlement and mediation processes operate. (Source: FCA Looks at Settlement and Mediation)

FCA updates on retirement market study: FCA has published an update on its work on the retirement income market, including revised terms of reference for its market study. It says it will publish interim findings from the study later this year, not in the summer as originally hoped. (Source: FCA Updates on Retirement Market Study)

FCA publishes authorisation guidance: FCA has published new guidance on its website on its authorisation process and supervision after authorisation. (Source: FCA Publishes Authorisation Guidance and FCA Publishes Supervision Guidance)

FCA publishes transaction reporting update: FCA has published a set of slides which give an update on wholesale conduct generally, with a focus on transaction reporting. (Source: FCA Publishes Transaction Reporting Update)