CASS 5.1 1Application

1. (1)

   CASS 5.1 to CASS 5.6 apply, subject to (2), (3) and CASS 5.1.3 R to CASS 5.1.6 R, to a firm that receives or holds money in the course of or in connection with its insurance mediation activity.

2. (2)

   CASS 5.1 to CASS 5.6 do not, subject to (3), apply:

   1. (a)

      to a firm to the extent that it acts in accordance with the CASS 4; or

   2. (b)

      to a firm in carrying on an insurance mediation activity which is in respect of a reinsurance contract; or

   3. (c)

      to an insurance undertaking in respect of its permitted activities; or

   4. (d)

      to a managing agent when acting as such; or

   5. (e)

      with respect to money held by a firm which:

      1. (i)

         is an approved bank; and

      2. (ii)

         has requisite capital under article 4(4)(b) of the IMD;

      but only when held by the firm in an account with itself, in which case the firm must notify the client (whether through a client agreement, terms of business, or otherwise in writing) that:

      1. (iii)

         money held for that client in an account with the approved bank will be held by the firm as banker and not as trustee (or in Scotland as agent); and

      2. (iv)

         as a result, the money will not be held in accordance with CASS 5.1 to CASS 5.6.

3. (3)

   A firm may elect to comply with:

   1. (a)

      CASS 5.1 to CASS 5.6 in respect of client money which it receives in the course of carrying on insurance mediation activity in respect of reinsurance contracts; and

   2. (b)

      CASS 5.1, CASS 5.2 and CASS 5.4 to CASS 5.6 in respect of money which it receives in the course of carrying on an activity which would be insurance mediation activity, and which money would be client money, but for article 72D of the Regulated Activities Order (Large risks contracts where risk situated outside the EEA);

   but the election must be in respect of all the firm's business which consists of that activity.

4. (4)

   A firm must keep a record of any election in (3).

An authorised professional firm regulated by The Law Society (of England and Wales), The Law Society of Scotland or The Law Society of Northern Ireland must comply withthe rules of its designated professional body as specified in CASS 5.1.4 R, in force on 14 January 2005, and if it does so, it will be deemed to comply with CASS 5.2 to CASS 5.6.

For the purposes of CASS 5.1.3 R the relevant rules are:

1. (1)

   If regulated by the Law Society (of England and Wales);

   1. (a)

      the Solicitors' Accounts Rules 1998; or

   2. (b)

      where applicable, the Solicitors Overseas Practice Rules 1990;

2. (2)

   if regulated by the Law Society of Scotland, the Solicitors' (Scotland) Accounts, Accounts Certificate, Professional Practice and Guarantee Fund Rules 2001;

3. (3)

   if regulated by the Law Society of Northern Ireland, the Solicitors' Accounts Regulations 1998.

1. (1)

   3A firm will, subject to (3), be deemed to comply with CASS 5.3 to CASS 5.6 if it receives or holds client money and it either:2

   1. (a)

      in relation to a service charge, complies with the requirement to segregate such money in accordance with section 42 of the Landlord and Tenant Act 1987 ("the 1987 Act"); or

      2
   2. (b)

      in relation to money which is clients' money for the purpose of the Royal Institution of Chartered Surveyors' Rules of Conduct ("RICS rules") in force as at 14 January 2005, it complies with the requirement to segregate and account for such money in accordance with the RICS Members' Accounts rules.2

2. (2)

   Paragraph (1)(a)2 also applies to a firm in Scotland or in Northern Ireland if in acting as a property manager the firm receives or holds a service charge and complies (so far as practicable) with section 42 of the 1987 Act as if the requirements of that provision applied to it.

3. (3)

   In addition to complying with (1), a firm must ensure that an account in which money held pursuant to the trust fund mentioned in section 42(3) of the 1987 Act or an account maintained in accordance with the RICS rules 2satisfies the requirements in CASS 5.5.49 R to the extent that the firm will hold money as trustee or otherwise on behalf of its clients.

   2

Subject to CASS 5.1.5A R money is not client money when:3

1. (1)

   it becomes properly due and payable to the firm:

   1. (a)

      for its own account; or

   2. (b)

      in its capacity as agent of an insurance undertaking where the firm acts in accordance with CASS 5.2; or

2. (2)

   it is otherwise received by the firm pursuant to an arrangement made between an insurance undertaking and another person (other than a firm) by which that other person has authority to underwrite risks, settle claims or handle refunds of premiums on behalf of that insurance undertaking outside the United Kingdom and where the money relates to that business.

3CASS 5.1.5 R (1)(b) and CASS 5.1.5 R (2) do not apply, and hence money is client money, in any case where:

1. (1)

   in relation to an activity specified in CASS 5.2.3 R (1) (a) to CASS 5.2.3 R (1) (c), the insurance undertaking has agreed that the firm may treat money which it receives and holds as agent of the undertaking, as client money and in accordance with the provisions of CASS 5.3 to CASS 5.6; and

2. (2)

   the agreement in (1) is in writing and adequate to show that the insurance undertaking consents to its interests under the trusts (or in Scotland agency) in CASS 5.3.2 R or CASS 5.4.7 R being subordinated to the interests of the firm's other clients.

Except where a firm and an insurance undertaking have (in accordance with CASS 5.1.5A R) agreed otherwise, for the purposes of 3CASS 5.1 to CASS 5.6 an insurance undertaking (when acting as such) with whom a firm conducts insurance mediation activity is not to be treated as a client of the firm.