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CASS 6.7 Treatment of custody assets after a failure

Application

CASS 6.7.1RRP

1This section applies to a firm following its failure.

Disposal of safe custody assets

CASS 6.7.2RRP
  1. (1)

    Before a firm takes any steps to dispose of a safe custody asset it must:

    1. (a)

      (subject to paragraph (2)) attempt to return it to the relevant client or transfer it to another person for safekeeping on behalf of the client in accordance with CASS 6.7.8R; and

    2. (b)

      (subject to paragraph (3)) take reasonable steps to notify the client of the firm’s proposed course of action for disposing of the safe custody asset.

  2. (2)

    A firm is not required to attempt to return or transfer a safe custody asset under paragraph (1)(a) where the client to whom the safe custody asset belongs has confirmed to the firm that it disclaims all its interests in the safe custody asset.

  3. (3)

    A firm is not required to notify a client under paragraph (1)(b) where:

    1. (a)

      the firm is able to return the safe custody asset to the relevant client or transfer it to another person on behalf of the client in accordance with CASS 6.7.8R; or

    2. (b)

      the client to whom the safe custody asset belongs has confirmed to the firm that it disclaims all its interests in the safe custody asset.

CASS 6.7.3GRP
  1. (1)

    The disposal of a safe custody asset referred to under CASS 6.7.2R(1) includes cases where the firm is using the procedure under regulation 12B of the IBSA Regulations to set a ‘hard bar date’ by giving a ‘hard bar date notice’, or is using another similar procedure in accordance with the legal procedure for the firm’s failure.

  2. (2)

    In any case, a firm should consider whether its obligations under law or any agreement permit it to dispose of a safe custody asset in the way in which it proposes to do so.

CASS 6.7.4ERP
  1. (1)

    Reasonable steps in CASS 6.7.2R(1)(b) include the following course of conduct:

    1. (a)

      determining, as far as reasonably possible, the correct contact details for the relevant client;

    2. (b)

      for a client for whom the firm has evidence that it was a professional client for the purposes of the custody rules at the time of the failure:

      1. (i)

        writing to the client at its last known address either by post or by electronic mail:

        1. (A)

          to inform it of the firm’s intention to dispose of the safe custody asset;

        2. (B)

          to inform it of the consequences of the firm’s proposed course of action in relation to the client’s ability to assert a claim in respect of that safe custody asset; and

        3. (C)

          to invite the client to submit a claim for that safe custody asset;

      2. (ii)

        where the client has not responded within 28 days of the communication under sub-paragraph (i), attempting to communicate the information in (i) to the client on at least one further occasion by any means other than that used in sub-paragraph (i) including by post, electronic mail, telephone or media advertisement; and

    3. (c)

      for any other client:

      1. (i)

        the same steps as under sub-paragraphs (b)(i) and (b)(ii); and

      2. (ii)

        where the client has not responded within 28 days of the second communication under sub-paragraph (b)(ii), attempting to communicate the information in sub-paragraph (b)(i) to the client on at least one further occasion by any means other than one in respect of which the firm has obtained positive confirmation that the client is not receiving such communications.

  2. (2)

    Compliance with paragraph (1) may be relied on as tending to establish compliance with CASS 6.7.2R(1)(b).

  3. (3)

    Contravention of paragraph (1) may be relied on as tending to establish contravention of CASS 6.7.2R(1)(b).

CASS 6.7.5GRP

For the purposes of CASS 6.7.4E(1)(a), a firm may use any available means to determine the correct contact details for the relevant client, including:

  1. (1)

    telephoning the client;

  2. (2)

    searching internal and/or public records;

  3. (3)

    media advertising;

  4. (4)

    mortality screening; and

  5. (5)

    using credit reference agencies or tracing agents.

CASS 6.7.6RRP

If the firm undertook a tracing exercise for the purposes of CASS 6.2.10R(4) (Allocated but unclaimed safe custody assets) before its failure but had not made the charity payment under that rule by the time of its failure then the findings of that exercise may be relied on for the purposes of CASS 6.7.4E(1)(a).

CASS 6.7.7RRP
  1. (1)

    A firm must make a record of any safe custody asset disposed of in accordance with CASS 6.7.2R at the time of the disposal.

  2. (2)

    The record under paragraph (1) must state:

    1. (a)

      the safe custody asset that was disposed of;

    2. (b)

      the value of the consideration received for the safe custody asset disposed of;

    3. (c)

      the name and contact details of the client to whom the safe custody asset was allocated, according to the firm’s records at the time of making the record under this rule; and

    4. (d)

      either:

      1. (i)

        the efforts applied by the firm to determine the client’s correct contact details under CASS 6.7.4E(1)(a); or

      2. (ii)

        if being relied on under CASS 6.7.6R, the efforts applied by the firm to determine the client’s correct contact details for the purposes of CASS 6.2.10R(4) (Allocated but unclaimed safe custody assets).

  3. (3)

    A firm must keep the record under paragraph (1) indefinitely.

Transfers of safe custody assets

CASS 6.7.8RRP
  1. (1)

    This rule applies where, instead of returning a safe custody asset to a client, a firm (Firm A) is able to transfer the safe custody asset to another person (Firm B) for safekeeping on behalf of the client.

  2. (2)

    Firm A may only effect such a transfer if, in advance of the transfer, it has obtained a contractual undertaking from Firm B that:

    1. (a)

      where regulation 10C(3) of the IBSA Regulations does not apply, Firm B will return the safe custody asset to the client at the client’s request; and

    2. (b)

      Firm B will notify the client, within 14 days of the transfer of that client’s safe custody asset having commenced:

      1. (i)

        of the applicable regulatory regime under which the safe custody asset will be held by Firm B;

      2. (ii)

        either:

        1. (A)

          of any relevant compensation scheme limits that may apply in respect of Firm B’s handling of the safe custody asset; or

        2. (B)

          of the fact that Firm B does not participate in a relevant compensation scheme, if that is the case; and

      3. (iii)

        where regulation 10C(3) of the IBSA Regulations does not apply, that the client has the option of having its safe custody asset returned to it by Firm B.

CASS 6.7.9GRP

Where regulation 10C(3) of the IBSA Regulations does apply, Firm A should, in advance of the transfer under CASS 6.7.8R, obtain a contractual undertaking from Firm B that:

  1. (1)

    Firm B will comply with the client’s request for a ‘reverse transfer’ as defined in regulation 10C of the IBSA Regulations; and

  2. (2)

    Firm B will notify the client, within 14 days of the transfer of that client’s safe custody asset having commenced, that the client can demand a ‘reverse transfer’ as defined in regulation 10C of the IBSA Regulations.