Client Money and Unbreakable Deposits

FCA Policy Statement on Client Money and Unbreakable Deposits

FCA Policy Statement 18/2: Client Money and Unbreakable Deposits – the FCA provides feedback and final rules on the proposed amendments on the Client Money 30-day rule and Unbreakable Deposits.

The final FCA rules include the following provisions:

  • Firms may hold a proportion of Client Money in an UD longer than 30 days, subject to certain conditions
  • Firms must have a documented policy, setting out the maximum proportion of Client Money that would be appropriate for it to deposit in an Unbreakable Deposit exceeding 30 days and the measures it will take to manage the risk of being unable to access client money when required
  • The CASS Resolution Pack must include the documented policy to allow an Insolvency Practitioner to identify whether the Firm places Client Money in Unbreakable Deposits exceeding 30 days
  • A Firm may hold an appropriate proportion of Client Money in 95-day Unbreakable Deposits. In advance of a Firm depositing Client Money in 95-day Unbreakable Deposits, it must provide each Client with a written explanation of the risks arising due to the longer notice periods for withdrawals. This may be as a standalone notification or a part of their existing disclosures, providing the explanation complies with the final rules. This includes being clear, fair and not misleading
  • The FCA has moved the requirement to report Unbreakable Deposits exceeding 30 days in the Client Money and Asset Return (CMAR) to SUP16.14. The FCA has also amended its CMAR guidance to make it clear that Firms must report any Unbreakable Deposit in use at the end of the reporting period. Firms must also report the unexpired term of an Unbreakable Deposit, where the remaining term exceeds 30 days. CMAR Guidance has also been updated on reporting of Unbreakable Deposits by Firms
  • Paragraphs 2.24 to 2.27 of PS18/2 summarise Investment Firms’ Liquidity Requirements

 

The final rules are set out in in Appendix 1 of PS18/2.

Further information:

To read more, please follow this link: https://www.fca.org.uk/publications/policy-statements/ps18-2-client-money-unbreakable-deposits

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Please Note: This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.

 

Source and credit: Compliancy Services


 

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