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CASS 1.1 Application and purpose

Application

CASS 1.1.1 G RP

CASS applies to a firm as specified in the remainder of this chapter.

Purpose

CASS 1.1.2 G RP

The purpose of this chapter is to set out to whom, for what activities, and within what territorial limits the rules, evidential provisions and guidance in CASS apply.

CASS 1.2 General application: who? what?

General application: who?

CASS 1.2.1 G RP

The rules in CASS 1.2 set out the maximum scope of this sourcebook. The application of CASS is modified for certain activities by 1CASS 1.4. Also particular chapters or sections of CASS may have provisions which limit their application.

CASS 1.2.2 R RP

CASS applies to every firm, except as provided for in CASS 1.2.3 R, with respect to the carrying on of:

  1. (1)

    all regulated activities except to the extent that a provision of CASS provides for a narrower application; and

  2. (2)

    unregulated activities to the extent specified in any provision of CASS.

CASS 1.2.3 R RP

CASS does not apply to:

  1. (1)

    an ICVC; or

  2. (2)

    an incoming EEA firm other than an insurer, with respect to its passported activities; or

  3. (3)

    a UCITS qualifier.

CASS 1.2.4 R RP

With the exception of this chapter and the insurance client money chapter, CASS does2 not apply to:

2
  1. (1)

    an authorised professional firm with respect to its non-mainstream regulated activities; or

  2. (2)

    the Society.

CASS 1.2.5 R RP

1The insurance client money chapter2 does not apply to an authorised professional firm with respect to its non-mainstream regulated activities, which are insurance mediation activities, if:

2
  1. (1)

    the firm's designated professional body has made rules which implement article 4 of the Insurance Mediation Directive;3

    3
  2. (2)

    those rules have been approved by the FSA under section 332(5) of the Act; and

  3. (3)

    the firm is subject to the rules in the form in which they were approved.

CASS 1.2.6 G

[deleted]2

2

General application: what?

CASS 1.2.7 G RP
  1. (1)

    The approach in CASS is to ensure that the rules in a chapter are applied to firms in respect of particular regulated activities or unregulated activities.

  2. (2)

    The scope of the regulated activities to which CASS applies is determined by the description of the activity as it is set out in the Regulated Activities Order. Accordingly, a firm will not generally be subject to CASS in relation to any aspect of its business activities which fall within an exclusion found in the Regulated Activities Order. The definition of designated investment business includes, however, activities within the exclusion from dealing in investments as principal in article 15 of the Regulated Activities Order (Absence of holding out etc).

  3. (3)

    The custody chapter and the client money chapter apply in relation to regulated activities, conducted by firms, which fall within the definition of MiFID business and/or designated investment business.5

    555
  4. (3A)

    The collateral rules apply in relation to regulated activities, conducted by firms, which fall within the definition of designated investment business (including MiFID business).2

  5. (4)

    The insurance client money chapter2 applies in relation to regulated activities, conducted by firms, which fall within the definition of insurance mediation activities.1

    2
  6. (5)

    [deleted]52

    5
  7. (6)

    The mandate rules apply in relation to regulated activities, conducted by firms, which fall within the definition of designated investment business (including MiFID business) and insurance mediation activity, except where it relates to a reinsurance contract.2

Application for 2retail clients, professional clients and eligible counterparties2

CASS 1.2.8 G RP
  1. (1)

    CASS applies directly in respect of activities conducted with or for all categories of clients.2

    2
  2. (2)

    [deleted]5

    2225
  3. (3)

    The insurance client money chapter2 does not generally distinguish between different categories of client. However, the term consumer4is used for those to 4whom additional obligations are owed, rather than the term retail client.2 This is to be consistent with the client categories used in 1the Insurance: New Conduct of Business sourcebook4.

    2424
  4. (4)

    Each provision in the custody chapter and the client money chapter makes it clear whether it applies to activities carried on for retail clients, professional clients or both. There is no further modification of the rules in these chapters in relation to activities carried on for eligible counterparties. Such clients are treated in the same way as other professional clients for the purposes of these rules.2

    555
CASS 1.2.9 G

[deleted]2

2

Investments and money held under different regimes

CASS 1.2.10 R

2[deleted]5

5
CASS 1.2.11 R RP

2Where a firm is subject to the client money chapter and5 the insurance client money chapter ,5 it must ensure segregation between money held under each chapter, including that money held under different chapters is held, in different, separately designated, client bank accounts or client transaction accounts.

5 5
CASS 1.2.12 G RP

2The purpose of the rules regarding the segregation of investments and money held under different regimes is to reduce the risk of confusion between assets held under different regimes either on an on-going basis or on the failure of a firm or a third party holding those assets.

CASS 1.2.13 G RP

2A firm may opt to hold under a single chapter money that would otherwise be held under different chapters (see CASS 5.1.1 R (3) and CASS 7.1.3 R5).

5 5 5

CASS 1.3 General application: where?

CASS 1.3.1 G RP

The rules in CASS 1.3 set out the maximum territorial scope of this sourcebook. Particular rules may have express territorial limitations.

UK establishments: general

CASS 1.3.2 R RP

Except as provided for in CASS 1.2.3 R (2), CASS applies to every firm, in relation to regulated activities carried on by it from an establishment in the United Kingdom.

UK firms: passported activities from EEA branches

CASS 1.3.3 R RP

CASS applies to every UK firm, other than an insurer, in relation to passported activities carried on by it from a branch in another EEA State.

CASS 1.3.4 R RP

1 CASS does not apply to an incoming ECA provider acting as such.

CASS 1.4 Application: particular activities

Occupational pension scheme firms (OPS firms)

CASS 1.4.1 R RP

In the case of OPS activity undertaken by an OPS firm, CASS applies with the following general modifications:

  1. (1)

    references to customer are to the OPS or welfare trust, whichever fits the case, in respect of which the OPS firm is acting or intends to act, and with or for the benefit of which the relevant activity is to be carried on; and

  2. (2)

    if an OPS firm is required by any rule in CASS to provide information to, or obtain consent from, a customer, that firm must ensure that the information is provided to, or consent obtained from, each of the trustees of the OPS or welfare trust in respect of which that firm is acting, unless the context requires otherwise.

Stock lending activity with or for clients3

CASS 1.4.2 G RP
1
  1. (1)

    The custody chapter and the client money chapter apply in respect of any stock lending activity that is undertaken with or for a client3 by a firm. 1

    33333
  2. (2)

    The collateral rules apply, where relevant, in respect of stock lending activity.1

    3

Corporate finance business

CASS 1.4.3 G RP
1
  1. (1)

    The custody chapter and the client money chapter apply in respect of corporate finance business that is undertaken by a firm.1

    3333
  2. (2)

    The collateral rules apply, where relevant, in respect of corporate finance business.1

    3

Oil market activity and energy market activity

CASS 1.4.4 G RP
1
  1. (1)

    The custody chapter and the client money chapter apply in respect of oil market activity and other energy market activity that is undertaken by a firm.1

    3333
  2. (2)

    The collateral rules apply, where relevant, in respect of energy market activity.1

    3

Appointed representatives and tied agents2

CASS 1.4.5 G RP
  1. (1)

    Although CASS does not apply directly to a firm's appointed representatives, a firm will always be responsible for the acts and omissions of its appointed representatives in carrying on business for which the firm has accepted responsibility (section 39(3) of the Act). In determining whether a firm has complied with any provision of CASS, anything done or omitted by a firm's1appointed representative (when acting as such) will be treated as having been done or omitted by the firm (section 39(4) of the Act1). Equally, CASS does not apply directly to tied agents. A MiFID investment firm will be fully and unconditionally responsible for the acts and omission of the tied agents that it appoints. 2

    11
  2. (2)

    Firms should also refer to SUP 12 (Appointed representatives), which sets out requirements which apply to firms using appointed representatives and tied agents2.

Depositaries

CASS 1.4.6 R RP

The client money chapter1 does 3not apply to a depositary when acting as such.

1 3 3
CASS 1.4.7 R RP

The remainder of CASS applies to a depositary, when acting as such, with the following general modifications:

  1. (1)

    except in the mandate rules,1'client' means 'trustee', 'trust' or 'collective investment scheme' as appropriate; and

    1
  2. (2)

    in the mandate rules,1'client' means 'trustee' 'collective investment scheme' or 'collective investment scheme instrument' as appropriate.

    1
CASS 1.4.8 R
2
  1. (1)

    Other than the mandate rules,3CASS does not apply to a trustee firm which is not a depositary,3 or the trustee of a personal pension scheme or stakeholder pension scheme, unless MiFID applies to it, in which case the custody chapter and the client money chapter do apply.32

    132
  2. (2)

    In 2the custody chapter, the client money chapter and the mandate rules, 'client' means 'trustee', 'trust',1 'trust instrument' or 'beneficiary',1 as appropriate.

    21331

Auction regulation bidding

CASS 1.4.9 R

4Where a firm carries on auction regulation bidding it may elect to comply with CASS (but not CASS 5) in respect of this activity, subject to the general modifications in CASS 1.4.10 R.

CASS 1.4.10 R

4Where a firm has made an election in accordance with CASS 1.4.9 R, CASS is modified so that in relation to that firm:

  1. (1)

    each reference to:

    1. (a)

      designated investments;

    2. (b)

      safe custody assets; and

    3. (c)

      contingent liability investments;

    includes a reference to a two-day emissions spot;

  2. (2)

    each reference to designated investment business includes auction regulation bidding;

  3. (3)

    each reference to safeguarding and administering investments, including safeguarding and administration of assets (without arranging) and arranging safeguarding and administration of assets, includes those activities where they are carried on in relation to a two-day emissions spot; and

  4. (4)

    the reference in CASS 6.2.3A R to an 'emissions auction product that is a financial instrument' includes a two-day emissions spot;

CASS 1.4.11 G

4The effect of CASS 1.4.10 R is that when a firm makes an election in accordance with CASS 1.4.9 R:

  1. (1)

    a two-day emissions spot falls within the scope of each chapter in CASS (save for CASS 5), for example:

    1. (a)

      the reference in CASS 6.1.1 R (1)(b) to safeguarding and administering investments is modified to include the activity of safeguarding and administering a two-day emissions spot; and

    2. (b)

      any money that the firm receives or holds for or on behalf of a client in the course of or in connection with its auction regulation bidding activities will be treated as client money and so will need to be dealt with in accordance with the client money rules; and

  2. (2)

    that election also has effect in relation to rules and guidance elsewhere in the Handbook, including:

    1. (a)

      COBS 3 (Client categorisation);

    2. (b)

      COBS 6.1.7 R (Information concerning safeguarding of designated investments belonging to clients and client money);

    3. (c)

      COBS 6.1.11 R (Timing of disclosure);

    4. (d)

      COBS 16.4 (Statements of client designated investments or client money);

    5. (e)

      SUP 3 (Auditors);

    6. (f)

      SUP 10A.4.4 R (the table of controlled functions) and SUP 10A.7.9 R (CASS operational oversight function (CF10a)); and

    7. (g)

      SUP 16.14 (Client money and asset return).

CASS 1.4.12 G

4The option to elect to comply with CASS set out in CASS 1.4.9 R only applies to the extent the firm is carrying on auction regulation bidding. Where a firm is carrying on MiFID business bidding, CASS applies to it in accordance with the general application rules in CASS for a firm that is carrying on MiFID business.

CASS 1.4.13 R

4Where a firm makes an election in accordance with CASS 1.4.9 R it must:

  1. (1)

    make a written record of the election, including the date from which the election is to be effective, on the date it makes the election;

  2. (2)

    keep that record from the date that it is made for a period of five years after ceasing to use the opt in.

CASS 1.4.14 R

4Where a firm that has opted in to CASS under CASS 1.4.9 R subsequently decides to cease its use of that opt in it must:

  1. (1)

    make a written record of this decision, including the date from which the decision is to be effective, on the date it takes the decision;

  2. (2)

    keep that record from the date that it is made for a period of five years after the date it is to be effective; and

  3. (3)

    discharge any outstanding fiduciary obligations that had arisen because the firm had elected to comply with CASS.

CASS 1.5 Application: electronic media and E-Commerce

Application to electronic media

CASS 1.5.1 G RP

GEN 2.2.14 R (References to writing) has the effect that electronic media may be used to make communications that are required by the Handbook to be "in writing" unless a contrary intention appears.

CASS 1.5.2 G RP

For any electronic communication with a customer, a firm should:

  1. (1)

    have in place appropriate arrangements, including contingency plans, to ensure the secure transmission and receipt of the communication; it should also be able to verify the authenticity and integrity of the communication; the arrangements should be proportionate and take into account the different levels of risk in a firm's business;

  2. (2)

    be able to demonstrate that the customer wishes to communicate using this form of media; and

  3. (3)

    if entering into an agreement, make it clear to the customer that a contractual relationship is created that has legal consequences.

CASS 1.5.3 G RP

Firms should note that GEN 2.2.14 R does not affect any other legal requirement that may apply in relation to the form or manner of executing a document or agreement.

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CASS 1.5.4 G

[deleted]1

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