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CASS 1 – Application and Purpose

PostedJune 23, 2025
UpdatedJune 23, 2025
ByAndy

1. Chapter Summary

CASS 1 defines the scope of the Client Assets Sourcebook, outlining who the rules apply to, what activities they cover, and where they apply territorially. It establishes the fundamental authority and objectives behind safeguarding client money and assets, serving as the foundation for all subsequent CASS rules. Its importance lies in correctly identifying the firms, activities, and boundaries that trigger client asset protections.

2. Applicability

CASS 1 applies to all FCA-regulated CASS firms, particularly those handling client money or client assets under CASS 6 and CASS 7. It covers both retail and professional clients, with carve-outs only in limited situations (e.g. certain ancillary activities without custody or money holding). It also confirms the territorial scope, meaning CASS rules generally apply to UK-based activities but may extend where UK firms hold overseas client assets.

3. Key Rules and Their Meaning

  • CASS 1.1 – Application Statement* “The purpose of this chapter is to set out to whom, for what activities, and within what territorial limits the rules, evidential provisions and guidance in CASS apply.” In practice, this means firms must assess whether they hold client money/assets and are therefore subject to CASS, and must understand the geographic reach of these obligations.
  • CASS 1.2 – General Application* Indicates that CASS rules apply to firms in respect of specific regulated activities (e.g., custody, safeguarding, administering investments). Firms need to map their activities against CASS functions to determine applicable obligations.

4. Interpretation Notes / FCA Expectations

  • The FCA expects firms to clearly identify their status as CASS firms and whether they handle client money/assets.
  • Firms should maintain documented activity assessments to justify why CASS applies and how territories are managed.
  • The scope defined here influences whether a firm needs to implement operational oversight, CASS-compliant accounts, and recordkeeping.

5. Practical Considerations for Firms

  • Compile a CASS applicability assessment, noting all activities and territories covered.
  • Use checklists to confirm whether client money or asset activities trigger CASS‐6 or CASS‑7 obligations.
  • Create internal guidance for staff on identifying CASS triggers and escalation protocols.
  • Document assessments and keep them updated to reflect business changes.

6. Related Handbook References

  • CASS 1A – Firm classification (large, medium, small) based on asset thresholds
  • CASS 6 – Client money rules
  • CASS 7 – Safeguarding client assets
  • SYSC 10 – Systems and Controls (including CASS oversight)
  • PRIN 2A – FCA Principles (focus on integrity and client interests)

7. Regulatory Focus / Enforcement Risk

  • Firms that misidentify their CASS status risk severe enforcement action due to mishandled client assets.
  • CASS 1 is a frequent area of regulatory scrutiny particularly during FCA thematic reviews.
  • Maintaining accurate activity and territory assessments demonstrates proactive compliance and mitigates risk.