There are two consultations contained within this paper. Chapter 2 (Clarifying the CASS firm classification and operational oversight regime) and Chapter 3 (Changes to the Client Money and Assets Return (CMAR) and guidance) should be read concurrently. Chapter 4 sets out proposals on the mandate rules (CASS 8). FSA notes that, since introducing the CF10a controlled function, it has noticed some shortcomings in the CASS firm classification and operational oversight requirements (CASS 1A) and is proposing some additional amendments to CASS 1A in this CP to address these. There are also proposed changes based on feedback received on the language and presentation of a number of the questions within the CMAR as well as the CMAR guidance notes. With regard to CASS 8, FSA says that it has identified that there is now a large degree of inconsistency in understanding among firms and their auditors which could lead to customer detriment or increased costs to firms. It is proposing to clarify the scope of the mandate rules, but does not propose to change the purpose of the mandate rules or the internal controls required by the mandate rules. Responses should be received by 30 September 2012. FSA plans to issue a PS in November 2012, with the final rules coming into force on 1 January 2013.

This is the text of a letter dated 19 March 2012 from Hector Sants to Andrew Tyrie (TSC) in which he set out the current position with regard to client assets and the special resolution regime (noting “under the current legislative and regulatory landscape, client assets distribution will remain something that occurs over the course of months, rather than weeks, even in the most orderly of firm failures”), the reasons for the failure of the firm and initial lessons learnt. The letter refers to FSA’s Business Plan and “CASS Resolution Pack”, which have been published since this letter was written.

Further to CP11/17, FSA sets out the final rules requiring certain firms to maintain and be able to retrieve a CASS Resolution Pack. The CASS RP contains documents and records that would help an insolvency practitioner return client assets more quickly following an investment firm failure. FSA summarises the feedback received and explains the changes have made as a result. It is noted that FSA will set out its response to other matters covered in CP11/16 in due course.

This PS summarises the feedback to the second part of the consultation in CP11/15, gives FSA’s response to this feedback, and publishes final rules in relation to custody liens. Firms must ensure that any custody agreement they enter into on or after 1 April 2012 complies with these rules and any custody agreement entered into before 1 April 2012 complies with these rules as soon as possible but no later than 30 September 2012. It is noted that FSA has not at this time taken a position either for or against the use of omnibus accounts, but may in future investigate their use in line with developments in European legislation.