CASS Explained: Client Money, Client Assets and Who Is Accountable
CASS is the FCA’s Client Assets Sourcebook: the rules that protect client money and assets held by regulated firms, so that if a firm fails, clients get their money and investments back quickly. For firms that hold client money or custody assets, CASS is one of the most closely supervised areas of regulation, and failures are treated seriously. This guide explains what CASS covers, how firms are classified, who is accountable, and the people firms need to run CASS well.
What Is CASS?
CASS is the Client Assets Sourcebook in the FCA Handbook. It sets the rules for how regulated firms hold and protect client money and client assets. The principle is simple: client money and assets belong to clients, must be kept separate from the firm’s own money, and must be identifiable and returnable if the firm fails. In practice, the rules are detailed and demanding. The FCA explains its approach on its client money and assets pages.
The Main Parts of CASS
| Chapter | What it covers |
|---|---|
| CASS 1 and 1A | Application of the rules, and firm classification and operational oversight |
| CASS 5 | Client money held by insurance intermediaries |
| CASS 6 | Custody rules for safeguarding clients’ financial instruments |
| CASS 7 | Client money rules for investment business |
| CASS 8 | Mandates: where a firm can control a client’s money held elsewhere |
| CASS 10 | The CASS resolution pack: records that help return assets quickly if the firm fails |
Which chapters apply depends on the firm’s business. An insurance broker usually deals mainly with CASS 5, while a wealth manager or platform will usually deal with CASS 6 and 7.
CASS Firm Classification
Firms holding client money or assets are classified by the amounts they hold, which affects how intensively they’re supervised and what they must report:
| Classification | Broadly |
|---|---|
| CASS small | Holds relatively small amounts of client money and assets |
| CASS medium | Holds amounts between the small and large thresholds |
| CASS large | Holds very large amounts of client money or client assets |
The thresholds and the calculation method are set out in CASS 1A. Medium and large firms have additional obligations, including submitting a regular Client Money and Asset Return (CMAR) to the FCA. Check the current thresholds against your firm’s figures.
Who Is Accountable for CASS?
CASS requires firms to allocate responsibility for oversight of their CASS operations to a director or senior manager. Under the Senior Managers and Certification Regime, firms that hold client money or assets must also allocate a Prescribed Responsibility for the firm’s compliance with CASS to one of their Senior Managers. That person is personally accountable.
In practice, CASS accountability often sits with:
- the chief operating officer, where client money operations sit in operations, see SMF24 explained
- the chief finance officer, where finance runs reconciliations and client money accounting
- a dedicated head of client assets at larger firms, supporting the accountable Senior Manager
Whoever holds the responsibility needs enough understanding of the rules to challenge the team running CASS day to day, and enough authority to fix problems.
What Good CASS Oversight Looks Like
CASS oversight checklist
- Clear allocation of CASS responsibility to a Senior Manager
- Accurate identification of which CASS chapters apply to the business
- Client money and asset reconciliations performed on time, with breaks investigated promptly
- Trust letters or acknowledgement letters in place for client bank and custody accounts
- Up-to-date CASS resolution pack
- Timely CMAR submissions, where required
- Breach log, with notifications to the FCA where required
- Regular CASS management information to the board or a committee
- Training for staff who handle client money and assets
- Annual CASS audit findings tracked to resolution
Reconciliations: The Heart of CASS
Reconciliations are how a firm proves that the client money and assets it should hold match what it actually holds. Internal reconciliations compare the firm’s records of what it owes clients with what it holds for them. External reconciliations compare the firm’s records with the statements of banks and custodians. Any difference, known as a break, must be investigated and resolved promptly, and shortfalls must be made good.
The frequency and method depend on the firm’s business and which CASS chapters apply, but for most firms holding client money, reconciliations are a daily discipline. Late or poorly evidenced reconciliations are among the most common findings in CASS audits, so the accountable Senior Manager should see regular reporting on timeliness, the number and age of breaks, and how they were resolved.
The CASS Audit
Firms that hold client money or assets must usually have an annual client assets report from their external auditor, under SUP 3. The auditor reports on whether the firm has maintained adequate systems and complied with the CASS rules. A qualified report, or one identifying breaches, is taken seriously by the FCA and usually leads to remediation and closer supervision.
CASS Breaches
Common CASS breaches include:
- late or inaccurate reconciliations
- client money held in the wrong accounts, or mixed with firm money
- missing or incorrect acknowledgement letters
- incomplete or out-of-date resolution packs
- misclassifying which money is client money
Firms must record breaches and notify the FCA of those that are material. The FCA has fined firms and individuals for CASS failures, and CASS weaknesses frequently feature in skilled person reviews. Our analysis of FCA enforcement trends looks at what recent cases mean for Senior Managers.
A growing wealth manager receives a qualified client assets report: reconciliations were regularly late, and acknowledgement letters were missing for two custody accounts. The FCA asks for a remediation plan. The firm’s COO, who holds the CASS Prescribed Responsibility, appoints an interim head of client assets to lead the remediation and recruits two experienced CASS accountants to the finance team. Within six months, reconciliations are on time and the next audit is clean.
The People Firms Need for CASS
| Role | What they do |
|---|---|
| Accountable Senior Manager | Holds the CASS Prescribed Responsibility and reports to the board |
| Head of client assets / CASS oversight officer | Runs CASS oversight day to day at medium and large firms |
| CASS accountants and analysts | Perform reconciliations, client money calculations and returns |
| Compliance monitoring | Tests CASS controls as part of the compliance monitoring plan |
| Interim CASS specialists | Lead remediation after audit findings or regulatory concerns |
CASS experience is highly specific: general finance experience isn’t enough. Our article on why CASS experience has to be specific explains what to look for. For CASS accountants and analysts below director level, Accountancy Capital, a sister practice, specialises in qualified finance recruitment. SMF Capital recruits the Senior Managers and interim leaders who hold CASS accountability.
CASS Leadership
Recruitment for the people accountable for client money and assets. Every SMF search is led personally by Adrian Lawrence FCA
Senior Managers
Who holds CASS accountability.
→ Chief Operating Officer (SMF24)
→ SMF2 Chief Finance search
Interim and Remediation
When CASS needs fixing.
→ Fractional and interim cover
→ Staffing a remediation
The Finance Team
Below Senior Manager level.
→ CASS accountants
→ The finance team behind SMF16/17
Every SMF search is led personally by Adrian Lawrence FCA
Frequently Asked Questions
What does CASS stand for?
Client Assets Sourcebook, the part of the FCA Handbook containing the client money and custody rules.
Which firms does CASS apply to?
Firms that hold client money or safeguard client assets in connection with their regulated business, including investment firms, wealth managers, platforms and insurance intermediaries.
Who is responsible for CASS?
The firm must allocate CASS oversight to a director or senior manager, and SMCR firms that hold client money or assets must allocate a Prescribed Responsibility for CASS compliance to a Senior Manager.
What is a CASS audit?
An annual report by the firm’s external auditor on whether it has complied with the CASS rules and maintained adequate systems.
What is a CASS resolution pack?
A set of records, required by CASS 10, that would help an insolvency practitioner return client money and assets quickly if the firm failed.
About the Author
Adrian Lawrence FCA is the founder of SMF Capital. He is a Chartered Accountant and Fellow of the ICAEW, holds a practising certificate in his own name, and is a former listed-company Finance Director with a BSc from Queen Mary College, University of London. He founded FD Capital in 2018 and has since built a network of five specialist recruitment practices. He leads every SMF Capital search personally, including Senior Managers and interim leaders responsible for client money and assets. View Adrian’s ICAEW profile.
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