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25 June 2019 5 min read

CASS 14: Is it too early to start talking about withdrawal from the EU again?

Daniel Plimmer

Daniel Plimmer
Senior Manager | Financial services | London

Guy Munton

Guy Munton
Partner | Regulatory compliance and CASS SME | London

The FCA’s Policy Statement PS19/5 published in February this year contains a significant amount of information that may be relevant to EEA firms that currently passport into the UK or managers of EEA domiciled UCITS and AIFs that market these funds in the UK.

The FCA has proposed the creation of a Temporary Permissions Regime (TPR) to allow for EEA firms passporting into the UK (TP firms) to continue their activities in the UK for a limited period following UK independence.

Previously client asset protection was regulated by the ‘home state’ for incoming EEA firms. However, these firms will now need to comply with specific new rules in the CASS sourcebook.

The result of this proposal will be a new chapter of CASS (CASS 14) that sets out the rules the FCA will apply to TP firms that receive or hold client assets in respect to their UK business. The near final text has now been published in PS19/5 and firms in scope will need to comply from the day following UK ‘exit day’. Some of the areas covered are:

  • Requirement for TP firms to provide additional reporting called TPCAR (monthly for large and medium firms) to the FCA
  • ‘TP Firm CASS disclosure’ to clients
  • Provide English translation of ‘home state’ client assets audit report
  • Disclosure of client assets treatment on insolvency (this even includes guidance on font size and seeking legal opinions)
  • Rules on Appointed Representatives and MiFID Tied Agents to TP firms

With just over 4 months to go until the October deadline, it is time to start talking about ‘exit day’ again. 

Given the well-documented challenges faced by firms in complying with the FCA’s CASS rules to date, there are definitely best practice learnings to be applied by TP firms looking to implement what is effectively a new CASS operating model. 

Whilst these changes will of course, increase the risk of non-compliance for TP firms, there is a real opportunity to review existing processes, risks and controls and seek to get things ‘right’ from day one.  During this process, firms may also identify opportunities for automation, leading to the removal of manual controls and a reduction in operational risk.