How will MiFID II impact the role of those responsible for CASS?

12 July 2017

The Financial Conduct Authority’s (FCA) MiFID II policy statement (PS17/14) released last week contained over 40 pages of changes to the FCA’s Client Assets sourcebook (CASS). This is the FCA’s final policy statement setting out the rules for their implementation of MiFID II. The policy statement included the changes we all expected from the previous consultation paper, like those around the appropriateness of Title Transfer Collateral Arrangements (TTCAs) and changes around retail clients, but there were other areas expanded on or removed that caused us all to breathe a sigh of relief. The change that could cause the biggest stir is around the impact these changes could have to those charged with the responsibility of CASS operational oversight.

The changes will impact all CASS investment firms (small, medium and large), as the regulator pushes for a “single director or a senior manager of sufficient skill and authority” not to have any other responsibilities in addition to their CASS oversight responsibilities, unless the firm is satisfied on reasonable grounds that:

  • The individual will still be able to discharge the CASS oversight responsibilities effectively; and
  • The firm’s full compliance with CASS will not be compromised.

Whereas this latest release isn’t as stringent as we expected it to be, it still means work for the relevant CASS firms and brings to light several questions. 

One such question is what would be deemed reasonable grounds? It is commonplace for any of you responsible for CASS to have a number of other responsibilities outside of CASS oversight, and this responsibility is usually delegated to another Director/Senior Manager - who may also oversee a number of areas beyond CASS. Let’s face it, CASS is on a long list of things to worry about for many of you. For those of you caught by the Senior Manager Regime (SMR), you’ve hopefully already spent time documenting your roles, responsibilities and reasonable steps under this regime, but have you really thought through the effectiveness of your ability to ensure full compliance with CASS on top of all your other responsibilities, and is this fully documented? For those of you who are CF10a (under CASS 1A.3) the MiFID II rules bring about a step change as noted above for you to focus on, ahead of the changes being implemented through the SMR in 2018.

Are you prepared for these changes? Our research shows that Senior Managers responsible for CASS spend as little as 5% of their time on this area. What’s the right answer? You will need insight into CASS in order to effectively discharge your oversight responsibility if you’re only spending a small proportion of your time on that area. We think appropriate team structure, management information (MI) and technology enabled solutions are key.

Given the continued focus on effective CASS oversight by the regulators, we suggest our clients:

  • Make sure they have taken the reasonable steps (as required under SMR) to document their roles and responsibilities and truly assess the reasonable ground they have taken to delegate certain responsibilities around CASS; and
  • Recognise the importance of innovation and technology enabled solutions to effectively manage and delegate their CASS oversight responsibilities, whether this is around using the vast amount of data at your fingertips to have more insight into compliance, gaining more insight through MI, finding better ways to monitor your use of third parties, etc.

We will continue to share our views on where we think the industry is going.

Brandy Rosel | Senior Manager
Profile | +44 (0)20 7213 4677
Follow @MannBrandy

Irfan Elias | Manager
Profile | +44 (0)20 7212 3934



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