FCA Handbook - CASS 13.6 Segregation and the operation of client money accounts

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CASS 13.6 Segregation and the operation of client money accounts

Requirement to segregate

A firm must take all reasonable steps to ensure that all client money it receives is paid directly into a client bank account at an approved bank, rather than being first received into the firm’s own account and then segregated.

A firm should arrange for clients and third parties to make transfers and payments of any money which will be client money directly into the firm’s client bank accounts.

A firm must ensure that client money is held in a client bank account at one or more approved banks.

Cheques received by a firm, made out to the firm, representing client money or a mixed remittance must be treated as client money from receipt by the firm.

Where a firm receives client money in the form of cash, a cheque or other payable order, it must:

(1)
pay the money into a client bank account in accordance with CASS 13.6.1R promptly and no later than the business day after the day on which it receives the money;
(2)
if the firm holds the money overnight, hold it in a secure location in line with Principle 10; and
(3)
record the receipt of the money in the firm’s books and records under the applicable requirements of CASS 13.10 (Records, accounts and reconciliations).

If a firm receives money (either in a client bank account or an account of its own) which it is unable immediately to identify as client money or its own money, it must:

(1)
take all necessary steps to identify the money as either client money or its own money; and
(2)
if it considers it reasonably prudent to do so, given the risk that client money may not be adequately protected if it is not treated as such, treat the entire balance of money as client money and record the money in its books and records as “unidentified client money” while it performs the necessary steps under (1).

If a firm is unable to identify money that it has received as either client money or its own money under CASS 13.6.6R(1), it should consider whether it would be appropriate to return the money to the person who sent it (or, if that is not possible, to the source from where it was received, for example, the bank). A firm should have regard to its fiduciary duties when considering such matters.

A firm must ensure that client money received by its agents is:

(1)
received directly into a client bank account of the firm; or
(2)
if it is received in the form of a cheque or other payable order:
1. (a)
  paid into a client bank account of the firm promptly and, in any event, no later than the next business day after receipt; or
2. (b)
  forwarded to the firm promptly and, in any event, so that it is received by the firm no later than the close of the third business day following the receipt of the money from the customer; or
(3)
if it is received in the form of cash, paid into a client bank account of the firm promptly and, in any event, no later than the next business day after receipt.

Mixed remittance

If a firm receives a mixed remittance it must:

(1)
pay the full sum into a client bank account promptly and in accordance with CASS 13.6.1R to 13.6.5R; and
(2)
no later than one business day after the payment of the mixed remittance into the client bank account has cleared, pay the money that is not client money out of the client bank account.

Interest

A firm must pay a client any interest earned on client money held for that client.