What Is a CASS Audit and Does My Company Require One?


By Wisteria

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If your company is a Designated Investment Firm (DIF), you’re probably familiar with CASS regulations. Most companies that hold or control client assets or investments are required by the Financial Conduct Authority (FCA) to carry out a CASS audit.

This is to ensure that investment firms are complying with FCA regulations and their clients’ capital is properly safeguarded. CASS regulations can be difficult to navigate, with severe penalties for non-compliance. In this article, we’ll unpick some of the complexities and advise you on how and when to prepare for a CASS audit.

What is a CASS audit?

A Client Assets Sourcebook (CASS) audit is a prerequisite for many UK investment firms. Brought into sharp focus in the wake of the Lehman Brothers collapse in 2008, the main purpose of the FCA’s CASS rules is to protect clients’ investments in the event of a firm’s insolvency – effectively ringfencing client money and custody assets.

As part of your CASS audit, your auditor will prepare a report to demonstrate that your firm is complying with all the necessary FCA requirements.

To obtain a “reasonable assurance” opinion, you’ll have to satisfy two key points:

  1. That your firm has maintained systems adequate to enable it to comply with the relevant rules throughout the period.

  2. That your firm was in compliance with those rules at the end of the period.

The deadline for CASS reports is four months from the end of the relevant reporting period, which can be up to 53 weeks.

The work is carried out in accordance with the Assurance Standard issued by the Financial Reporting Council which outlines the work your CASS auditor will need to undertake when evaluating and reporting on your firm’s compliance with the CASS rules.

What do I have to do to comply with CASS regulations?

Since the financial crash of 2008, CASS has been a key priority for the FCA, and firms that fail to comply with the guidelines can expect harsh penalties.

As an investment firm trading in the UK, it’s important that you’re aware of your responsibilities. Here are a few key things to consider:

  1. As a Designated Investment Firm (DIF) you are required to comply with CASS 7 (client money) and CASS 6 (custody assets) of the FCA rules.

  2. Even if your firm doesn’t hold client assets, under certain circumstances you may still require a CASS assurance report.

  3. Some organisations don’t have to provide a CASS report, such as investment management or personal investment firms that don’t require a statutory audit.

Which CASS reports does my company require?

To ensure your audit goes smoothly, you first need to know which CASS reports your company requires.

CASS regulations differ depending on how your firm trades and exactly which client assets and investments it holds. Here’s a quick breakdown which should give you a better idea of your obligations:

  1. If your firm holds or controls both client money and safe custody assets, you’ll require a reasonable assurance report.

  2. If your firm is permitted to but claims not to hold client assets or does not have permission to hold client assets, you’ll need a limited assurance report.

  3. If your firm holds client money but does not hold safe custody assets, or vice versa, you’ll require a hybrid assurance report.

Speak to us about CASS Regulations

The rules governing CASS are far from straightforward and the penalties for non-compliance can be severe, with firms falling foul of the FCA receiving stiff fines and public censure.

To protect your business from financial and reputational damage and ensure your clients’ assets and investments are properly safeguarded, it’s important to do your due diligence.

If you’re in any doubt about exactly what you need to do to comply with FCA rules around CASS, please feel free to get in touch and speak to one of our advisers.

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