Client Money by Terence Clark
You may recall CP12 / 20 issued by the Financial Services Authority ( FSA ) last summer , which proposed a number of changes to the client money ( CASS ) rules , particularly those surrounding Non Statutory Client Accounts .
A policy statement was expected in Q1 2013 but this has now been delayed until at least Q3 2013 .
In our discussion with the FSA in 2012 , it was made very clear that the preferred route from the regulator was that all insurers ( and wholesalers ) should grant unconditional Risk Transfer , this being the ultimate safety net for customers .
The CP12 / 20 did not go this far , as such action would need to involve a great deal of work bringing together many parties , but the Financial Conduct Authority ( FCA ) still sees this as its long term aim , a fact indicated in our meeting with the regulator recently .
BIBA have put a great deal of effort in to this area and are making great progress with insurers , but there are still many barriers to cross to get this industry wide , particularly with Lloyds .
Whilst this all sounds good news ( and it is ), we would urge all brokers to be mindful that many insurer Terms of Business Agreements ( TOBAs ) are still not up to scratch when it comes to what is client and what is insurer money and we see many examples of supposed Risk Transfer TOBAs and then the body of the TOBA reverts to Client Money and tells you to keep it in a client account !!
Indeed the vast majority , if not all TOBAs do not grant unconditional Risk Transfer . It may be at the top of the body of the TOBA , but later in a document , you may find a number of clauses which add conditions to this , so not helpful to the broker , to say the least . It is therefore important to ensure that all TOBAs are thoroughly reviewed and understood when they land on your desk .
Please do not just sign and return ….
We would urge all brokers to engage with their professional advisers and compliance consultants to help navigate this somewhat tricky path . However , a word of warning , make sure that your advisers , whoever they happen to be , large or small , have a complete grasp of the CASS rules and Risk Transfer otherwise any work you do could be a waste of time .
Indeed , I heard one large professional firm of advisers tell firms that unconditional risk transfer was here and now . The Insurer TOBA may not say this , but the insurer will take the view that it is if there is a problem . I am sorry , but I do not believe this for one minute , it is very much the old adage- “ If it ’ s not written down ……”.
So , read , review and understand , but please do not resist the urge to get professional advice on this topic . It is the major focus of the regulator , and if you get it wrong , the consequences could be severe .
Please speak to the helpdesk or your usual RWA consultant should you require any assistance .
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