CASS 14 – Ensuring Accurate Client Asset Records
1. Chapter Summary
CASS 14 sets out the detailed requirements for firms to maintain accurate records and perform regular reconciliations of client assets. This chapter is essential because it ensures firms have up-to-date, reliable data to protect client money and financial instruments effectively. Proper recordkeeping and reconciliation are critical controls to prevent client asset loss, misappropriation, or errors, forming a fundamental part of the FCA’s client asset safeguarding framework.
2. Applicability
This chapter applies to all FCA-authorized firms that hold or control client assets subject to CASS client money and/or client financial instrument rules. It covers firms regardless of client type or business model, but certain reconciliation specifics may vary depending on the nature of the client assets (e.g., money versus financial instruments) and whether business involves MiFID or non-MiFID clients.
3. Key Rules and Their Meaning
- CASS 14.2.1R – Recordkeeping requirements Firms must keep complete and accurate records of client assets sufficient to enable proper reconciliation and audit. In practice: Firms need robust systems that log all client money movements and client financial instrument holdings clearly and traceably.
- CASS 14.3.1R – Frequency of reconciliation Client money reconciliations must be carried out daily or as frequently as appropriate to the business model. Client financial instruments require regular reconciliation according to firm size and complexity. Nuance: Smaller or less complex firms may reconcile less frequently if justified and approved by the FCA, but daily is the standard expectation for client money.
- CASS 14.4.1R – Reconciliation processes Firms must compare their internal records of client assets against external records (e.g., bank statements, custodial records) to identify and resolve discrepancies promptly. Explanation: This helps detect errors, unauthorized use, or fraud early, protecting client assets.
- CASS 14.5.1R – Investigations and rectification of discrepancies If discrepancies arise, firms must investigate and resolve them without delay and report material discrepancies to senior management and the FCA if applicable. Regulatory intent: Prompt action ensures client asset integrity and regulatory compliance.
4. Interpretation Notes / FCA Expectations
- The FCA expects firms to have automated, auditable reconciliation processes with documented controls.
- Firms should maintain historical reconciliation records for FCA review and audit purposes.
- The FCA guidance (G rules) emphasizes the importance of escalation procedures when discrepancies occur and internal audit verification.
5. Practical Considerations for Firms
- Implement and maintain a reconciliation policy detailing frequency, responsible staff, and escalation paths.
- Use technology solutions to automate client money and client financial instrument reconciliation where possible.
- Maintain comprehensive logs and exception reports to demonstrate timely discrepancy resolution.
- Train staff on reconciliation procedures and importance of accuracy.
6. Related Handbook References
- CASS 7, 10, 11 – Specific safeguarding and handling rules for client money and financial instruments
- SYSC – Systems and controls requirements supporting recordkeeping and reconciliation
- PRIN – FCA principles emphasizing integrity and client protection
- COBS 2 – Client disclosures related to client asset safeguarding
7. Regulatory Focus / Enforcement Risk
- FCA enforcement often targets firms with poor or irregular reconciliation practices leading to client asset shortfalls.
- Failures in timely identification and resolution of reconciliation discrepancies present a high regulatory risk.
- Firms are expected to proactively address and report issues to avoid FCA penalties.