Despite the elapse of nine months since the publication of the bulky CASS consultation paper (CP13/5), memories of the FCA’s proposals may not have faded totally. That is just as well, given that the Policy Statement is now imminent and implementation will therefore need to get underway pretty soon.

We remain of the view that the CP draft rules contain a number of weaknesses which we hope will have been tackled prior to the publication of the PS. It is, for instance, very difficult to see how FCA believes consumers will benefit from the proposed changes associated with interest on client money. It is a surprise to see that they did not propose to review the definitions of designated client bank accounts and designated client fund accounts, both of which present worryingly fragile regimes with potential losses to consumers arising from minor, one-off administrative oversights which could have a dramatic and widespread impact on the distribution of client money following an insolvency, compromising the very object of the client money rules. Add to that the regulator’s undeclared (and possibly unintended, as the charitably-minded might suggest) escalation in liability for CASS firms providing custody services and there is clearly some work to be done even before deciding what sort of transitional provisions to apply to the replacement of existing bank acknowledgement letters. (For OWL comments on the CP13/5 proposals, see the News section on our website.)

For investment firms labouring under the burden of implementation of AIFMD, CRD, EMIR and FATCA, to name but a few, this is going to be strikingly unwelcome. And yet, as this measure is an example of that almost extinct beast, a national proposal, we should expect to see FCA pursue it with enthusiasm and determination.

We will be reviewing the new rules when published.