Changes Expected To Affect Around 1,500 Firms

New rules for how FCA regulated firms carry out investment business have been finalised.

It is estimated that the changes will affect approximately 1,500 FCA regulated firms that carry out investment business and who collectively hold over £100bn of client money and £10tn of custody assets.

According to the FCA, the changes include a rewrite of the client money rules for investment firms and substantial amendments to the custody rules in the client assets sourcebook (CASS).

The alterations have been designed to improve firms’ systems and controls around segregation, record keeping and reconciliations and set out how investment firms must address client assets risks within their business.

The FCA says that the final rules address lessons learnt from recent insolvencies, feedback from firms themselves and observations from the FCA’s specialist Client Assets Unit.

David Lawton, Director of Markets at FCA said:

“The protection of client assets is central to confidence in the UK markets and fundamental to consumers’ rights and the trust they place with firms. These changes will improve the protection offered to client assets and should speed up the recovery of client assets on a failure of a firm. Coupled with the increased focus the FCA has had on client assets, they will go a long way to ensure that confidence in UK markets is maintained and consumers are protected.”

Expert Opinion

This tightening up of the rules is significant and clearly has the potential to affect a lot of firms that carry out investment business. <br/> <br/>“There have been a series of FCA Enforcement actions against firms for breaches of CASS rules from which fines were then imposed. This latest development demonstrates that CASS remains firmly on the FCA's radar.” <br/>