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CASS 7A.2 Primary pooling events

Failure of the authorised firm: primary pooling event

CASS 7A.2.1G
  1. (1)

    A firm can hold client money in a general client bank account, a designated client bank account or a designated client fund account.

  2. (2)

    A firm holds all client money in general client bank accounts for its clients as part of a common pool of money so those particular clients do not have a claim against a specific sum in a specific account; they only have a claim to the client money in general.

  3. (3)

    A firm holds client money in designated client bank accounts or designated client fund accounts for those clients that requested their client money be part of a specific pool of money, so those particular clients do have a claim against a specific sum in a specific account; they do not have a claim to the client money in general unless a primary pooling event occurs. A primary pooling event triggers a notional pooling of all the client money, in every type of client money account, and the obligation to distribute it.

  4. (4)

    If the firm becomes insolvent, and there is (for whatever reason) a shortfall in money held for a client compared with that client's entitlements, the available funds will be distributed in accordance with the client money distribution rules.

CASS 7A.2.2RRP

A primary pooling event occurs:

  1. (1)

    on the failure of the firm;

  2. (2)

    on the vesting of assets in a trustee in accordance with an 'assets requirement' imposed under section 48(1)(b)of the Act;

  3. (3)

    on the coming into force of a requirement for all client money held by the firm; or

  4. (4)

    when the firm notifies, or is in breach of its duty to notify, the FSA, in accordance with CASS 7.6.16 R (Notification requirements), that it is unable correctly to identify and allocate in its records all valid claims arising as a result of a secondary pooling event.

CASS 7A.2.3RRP

CASS 7A.2.2R (4) does not apply so long as:

  1. (1)

    the firm is taking steps, in consultation with the FSA, to establish those records; and

  2. (2)

    there are reasonable grounds to conclude that the records will be capable of rectification within a reasonable period.

Pooling and distribution

CASS 7A.2.4RRP

If a primary pooling event occurs:

  1. (1)

    client money held in each client money account of the firm is treated as pooled; and

  2. (2)

    the firm must distribute that client money in accordance with CASS 7.7.2 R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7A.2.5 R.

CASS 7A.2.5RRP
  1. (1)

    When, in respect of a client, there is a positive individual client balance and a negative client equity balance, the credit must be offset against the debit reducing theindividual client balance for that client.

  2. (2)

    When, in respect of a client , there is a negative individual client balance and a positive client equity balance , the credit must be offset against the debit reducing the client equity balance for that client.

CASS 7A.2.6G

A client's main claim is for the return of client money held in a client bank account. A client may be able to claim for any shortfall against money held in a firm's own account. For that claim, the client will be an unsecured creditor of the firm.

Client money received after the failure of the firm

CASS 7A.2.7R

Client money received by the firm after a primary pooling event must not be pooled with client money held in any client money account operated by the firm at the time of the primary pooling event. It must be placed in a client bank account that has been opened after that event and must be handled in accordance with the client money rules, and returned to the relevant client without delay, except to the extent that:

  1. (1)

    it is client money relating to a transaction that has not settled at the time of the primary pooling event; or

  2. (2)

    it is client money relating to a client, for whom the client money entitlement, calculated in accordance with CASS 7A.2.5 R, shows that money is due from the client to the firm at the time of the primary pooling event.

CASS 7A.2.8G

Client money received after the primary pooling event relating to an unsettled transaction should be used to settle that transaction. Examples of such transactions include:

  1. (1)

    an equity transaction with a trade date before the date of the primary pooling event and a settlement date after the date of the primary pooling event; or

  2. (2)

    a contingent liability investment that is 'open' at the time of the primary pooling event and is due to settle after the primary pooling event.

CASS 7A.2.9RRP

If a firm receives a mixed remittance after a primary pooling event, it must:

  1. (1)

    pay the full sum into the separate client bank account opened in accordance with CASS 7A.2.7 R; and

  2. (2)

    pay the money that is not client money out of that client bank account into a firm's own bank account within one business day of the day on which the firm would normally expect the remittance to be cleared.

CASS 7A.2.10GRP

Whenever possible the firm should seek to split a mixed remittance before the relevant accounts are credited.

CASS 7A.2.11RRP

If both a primary pooling event and a secondary pooling event occur, the provisions of this section relating to a primary pooling event apply.