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FCA answers coronavirus questions on CASS audit

7 April 2020: the Financial Conduct Authority (FCA) has responded to queries on a number of different areas of client assets compliance relating to the current COVID-19 crisis, including audit, cheques and physical asset reconciliations.

It set out its current position in relation to client assets in a statement yesterday, which includes some items of relevance for client assets (CASS) auditors. Queries received to date have fallen into seven areas:

1. Audit

There have been concerns reported around additional breaches and costs associated with the impact of COVID-19, however the FCA has not yet seen these materialise. 
 
If auditors are concerned about their ability to meet the four-month deadline, the late reporting rules in SUP 3.10.8 must be followed. 
 
CASS auditors are reminded of their statutory duty to report (via CASSAudit@fca.org.uk) any significant matters with compliance. 

2. Cheques

Where CASS firms have issues handling cheques, they need to consider the harm caused on a case by case basis. Where there are logistical difficulties around the one business day rule, firms should be able to demonstrate they have tried to mitigate these. 

3. Physical asset reconciliations

Firms need to notify the FCA if they can’t conduct a physical asset reconciliation due to issues created by COVID-19. Firms must take steps where possible to ensure client assets remain protected. 

4. Depositing client money

The FCA recognises there may be challenges around the segregation and diversification of client money and reminds firms accounts can be opened at; central banks, CRD credit institutions, banks authorised in a third country and qualifying money market funds. 
 
They also warn that if firms have issues, they need to have carried out a detailed assessment before contacting the FCA. 

5. Notification of breaches

As a vital part of the regime, this must continue as required. 

6. Classification of firms 

Continues as normal – report to the FCA in January. 

7. Delays to improvement processes

The FCA realises that firms’ improvement programmes may be delayed. Firms should consider reporting delays and keep the FCA informed of their progress. 
 
For practical guidance, commentary and support on the investment management sector for financial services professionals visit ICAEW’s Investment Management page.