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Written by Chris McCullam on Monday 1 September 2014

From the clarification of rules and principles through to creation of dedicated approved persons there has been a growing focus from the regulator on the treatment and management of client money since the collapse of Lehman Brothers in 2008.

The regulator is taking a tough stance with over £45m imposed in fines relating to CASS breaches, enforcement actions against firms and individuals and large numbers of s166 Skilled Person reports. The scope of regulatory interest is suitably broad covering wealth managers, brokers, asset managers and platforms. For many, the mention of Client Money and CASS brings forth images of bank statements, holdings statements, contract notes and the systems/spreadsheets used to reconcile between them. This is really only part of the requirement, the bulk of fines issued have been in relation to failures in segregation of client money from firm money.

Within the CASS rules, after all the requirements for audit and reconciliation – being able to tell how much client money/assets you are holding at any point in time – there is provision for creation and maintenance of a Resolution Pack.  The aim of this pack is to enable an Insolvency Practitioner to return money and assets to clients rapidly.

On the surface this feels like it could just be the latest balances and allocations of assets and cash held on behalf of the client, however, it needs to be much more than that.  Yes, it needs to detail who has what where but there is more needed to enable return of money and assets to clients. When insolvency happens, or a firm is considering it, there is no guarantee that the operations staff will be on hand to turn the handle of the business to straighten out and return client money – the CASS Resolution Pack (RP) needs to contain sufficient information, at different levels of detail, to enable external overseers to manage the business. 
The platypodian construct of the CASS RP is at once a Disaster Recovery plan, Operating Model and Client Holdings report designed to be wheeled out within 48 hours.

The CASS rules apply to individual regulated legal entities and these are often organisationally and operationally different to the businesses that deliver service to customers.  There are outsource arrangements to consider, functions delivered by different parts of a parent group, different IT systems and a whole host of contractual and legal arrangements in place. Articulating all these different aspects to a wide audience quickly, concisely and easily is no mean feat.  Many firms have their procedures documented but to fully communicate the how, where and why of a business more than detailed procedures are required.

Many of the models and assets of Business Architecture are ideally suited to ensure that a legal entity CASS RP is consistent, understandable and as complete as it can be.  Taking a step back to get sight of the business such that CASS impacts and obligations are understood and visible as part of a wider, end-to-end view gives context and meaning to the activities and operations necessary to unwind a client’s holdings and return their money.

Having robust and structured views of the organisation can only be of help when the regulator or a skilled person comes to call and asks to see ‘what would you do if…’

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