CP17/29 Client Money – Unbreakable Deposits

On 1 August 2017, the FCA published consultation paper CP17/29 on client money and unbreakable deposits, which sets out minor amendments to CASS.

The FCA has found that some firms are experiencing difficulty depositing client money with banks. CASS 7 prevents firms from placing client money in bank accounts with unbreakable terms of longer than 30 days. Banks, however, have reduced appetite for client money under such terms, due to the associated cost of liquidity requirements.

CP17/29 proposes that firms are able to hold a proportion of client money in unbreakable deposits of up to 90 days. CASS medium and large firms would be required to report client money in unbreakable deposits of 31-90 days in their CMAR.

By making these proposals, the FCA are seeking to prevent the potential harm to consumers if a firm reaches a point where it is unable to deposit client money at banks that meet its risk tolerance.

This could result in client money being returned to clients against their wishes or being deposited with banks that do not meet due diligence requirements.

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