27 July 2018

CASS rules - a changing world

What can we learn from the most recent cycle of CASS audits?

As we emerge from another busy audit season, we look back to reflect on lessons learned from the cycle of December CASS audits. One point we have noted is that while firms have generally been preparing a document mapping all CASS rules to the control that mitigates the associated risk, firms have not been revisiting this document, where changes are noted to the CASS rules.

As a result of MiFID II implementation in the UK on 3 January 2018, a number of changes were made to the rules in both chapters 6 and 7 (which are the key chapters on which we would give an opinion). While this did fall outside of the audit period for December 2017 CASS audits, we would still expect firms to have taken the necessary steps to revisit the rule mapping document and to ensure this is up-to-date.

Some steps in particular are:

  • those firms with permissions to hold custody assets in accordance with CASS 6 should review the rules related to title transfer collateral arrangements. The rules in relation to depositing safe custody assets with third parties have also been updated;
  • CASS 7 has been updated to clarify those rules that would or would not apply on a primary pooling event. This is as a result of a number of updates to CASS 7A;
  • a weakness we still note when reviewing CASS risk assessments is that firms rarely have a detailed policy or procedure in place in respect of a primary or secondary pooling event. While we appreciate such events may not be at the forefront of any CF10a’s mind, these are important to ensure the orderly return of money or assets to clients.

We have developed an updated CASS rule mapping template that properly reflects the changes to these rules, helping firms to ensure they are up-to-date. We would of course be happy to advise on the impact of these changes – please contact Emma MacArthur for further details.

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