The FCA has recently completed a review of 24 firms for their compliance with CASS.
Although the firms reviewed operated in the CFD and spread betting arena, all firms subject to CASS should take on board the findings to compare them with their own internal processes.
The review makes depressing reading in that the visit teams found a range of CASS issues at all of the firms visited. Common themes were:
- CASS resolution packs: Incomplete with missing core contents requirements and records, inadequate frequency of updates and lack of formal approval by the governing body;
- Internal client money reconciliation: Non-compliant or no internal reconciliation using external bank balances only. Lack of adjustment for un-cleared cheques and unidentified receipts. Some firms were giving credit to client accounts before funds had cleared through various payment systems without prefunding. Some firms included negative equity in the client money requirement;
- Acknowledgement letters: Incorrect wording, account names and unsigned letters; and
- Client agreements: some terms did not reflect the practice of how the firms were treating clients.
We are informed that this list was not exhaustive in the issues identified.
The review ends with the promise that more short notice visits will be carried out in the future and that “our expectations will be raised in terms of compliance”. Looking at the wider picture, the recently published FCA Report and Accounts for 2014/15 reveal (page 55) that a total of 159 firms were subject to CASS-related visits during the year, with the FCA taking action against 28 firms and 27 individuals for CASS failings and imposed 43 penalties totalling £1.4bn.
The FCA web site maintains pages devoted to CASS – see link – which may be a useful reference source and which also provides access to a recording of a FCA CASS briefing held in January.
