CASS 1A
1. Chapter Summary
CASS 1A defines how firms are classified under the Client Assets Sourcebook—small, medium, or large—based on the volume of client money or safe custody assets they hold. It sets out the annual review requirement and governance structures firms must maintain. This chapter is vital for determining the proportionality of client asset rules and ensuring firms have appropriate oversight based on size and scale.
2. Applicability
Applies to all FCA-regulated firms dealing with client money or assets under CASS (custody, safeguarding, etc.). Classification affects whether firms are subject to additional operational oversight, audit, and control obligations. Some small firms may benefit from simplified requirements, while larger firms face enhanced governance responsibilities .
3. Key Rules and Their Meaning
- CASS 1A.1 (Application) Firms must classify themselves based on total client money or asset volumes. Practice: This self-assessment determines which tier of CASS rules applies and triggers reporting or audit thresholds.
- CASS 1A.2 (Firm Classification) Firms are designated as small, medium, or large depending on asset thresholds. Meaning: Larger firms incur additional obligations, such as appointing senior managers with CASS oversight and conducting annual reviews .
- CASS 1A.3 (Operational Oversight) Small firms must appoint a director or senior manager responsible for CASS compliance, while medium/large firms face enhanced governance obligations. Nuance: The level of scrutiny and oversight scales with firm size to match risk exposure .
- CASS 1A.2.9R (Annual Review) Firms must review their classification at least annually, or more frequently if asset volumes change. In practice: Provides a mechanism for firms to update their CASS status and governance as they grow or contract.
4. Interpretation Notes / FCA Expectations
- The FCA expects firms to make honest and accurate assessments of client asset volumes, with clear audit trails.
- Classification influences the level of oversight and controls required—a small firm won’t simply choose ‘small’ to avoid obligations; evidence must support the choice.
- Regular reviews must be documented to show due compliance and adaptation to business changes.
5. Practical Considerations for Firms
- Implement accounting systems capable of categorising client money and assets by volume.
- Assign responsibility and document the roles of those overseeing CASS compliance (senior manager for small firms; board-level oversight for larger firms).
- Conduct and document annual reviews of classifications, detailing thresholds, calculations, and changes.
- Ensure governance policies and authority maps reflect classification and CASS responsibilities.
6. Related Handbook References
- CASS 1 – Scope and application of the Client Assets Sourcebook
- CASS 6 / 7 – Client money and asset safeguarding obligations
- CASS 11 – Operational oversight responsibilities
- SYSC 10 / PRIN 2A – Systems, controls, governance, firm standards
- FSMA section 138A – FCA rule-making and waiver provisions relevant to CASS operations
7. Regulatory Focus / Enforcement Risk
- FCA routinely examines firm classification during supervision and audits; misclassification or failure to adjust as assets change is a common breach finding.
- Governance lapses—such as not appointing a CASS oversight manager—can trigger enforcement, particularly in small firms.
- Firms must treat classification and operational oversight as core compliance functions, not formalities.