The provisions relating to how a firm may withdraw commission from the client bank account can be found at CASS 5.5.16 R and CASS 5.5.17 G. In the first instance, a firm can only withdraw commission from its client bank account when it receives the premium from the client (or from a third party premium finance provider on the client's behalf). A firm will also have to ensure that removing commission is consistent with the authority given by its terms of business maintained with its client and with the insurance company the premium will become payable to. This is so both the client and the insurance company are clear about the point when the commission will cease to be client money - that is, when it is earned by the firm and so 'due and payable' to the firm for its own account.
A mixed remittance is a payment comprising client money and money that is not client money - for example, typically it could contain commission belonging to the firm. Your firm should note that if its terms of business with its client and the insurance company specify that commission will be due and payable to the firm immediately when the client pays the premium, you must treat the premium as a mixed remittance. In this case, the firm must pay the full amount of the payment into the client bank account. The commission that belongs to the firm must then be withdrawn from the account in line with CASS 5.5.16 R (2) i.e. as soon as reasonably practicable and not later than 25 business days of the payment clearing the client's bank account.
CASS 5.5.17 G (3) explains that where a client makes payments of a premium to a firm in instalments, the commission payable on each instalment may only be drawn down when it is due and payable to the firm.
A firm may pass a premium to a second firm, in line with CASS 5.5.34 R:
CASS 5.5.7 G explains that in such a case the second firm will treat the first as its client (if it is also a FSA regulated firm) and will in turn be required to segregate the premium it receives into a statutory or non-statutory trust.
CASS 5.5.33 G explains that when a firm transfers a premium to a third party, it will not automatically discharge its duties to its client as trustee, despite the premium being shown in the firm's client ledgers as paid to the third party. So if your firm pays a premium to a third party firm, the premium will remain client money of your firm until it reaches the insurance company (matched by the right to have the third party account for the sum). Similarly, the premium will be client money of the third party firm held on behalf of its client - your firm - until it reaches the insurance company. That is unless during its transit to the insurance company the money is held, at any time, by a firm that is authorised to hold that insurance company's money as agent. At this point that premium becomes the insurance company's money.
Firms are reminded in CASS 5.5.81 G (3) that they should also exercise appropriate skill, care and judgment in selecting third parties they transfer client money to.
In settling a claim or returning a premium, money passed from an insurance company to your firm may subsequently be transferred to a third party firm before payment to the policyholder. In these circumstances, the claim or premium refund will remain client money of your firm only until it reaches your client (the third party firm).