Chartered Accountants and Professional Business Advisers

FCA and Financial Services Newsletter January 2017

Client Money and Asset Rules

New guidance has been released which audit firms will be following when undertaking Client Money and Assets (CASS) audits. This will apply to the period beginning on or after 1 January 2016 so will affect any upcoming December 2016 year end audits.

These changes have been implemented by the Financial Reporting Council so you won’t see them in the FCA Handbook.

The audit is approached from a rules and systems perspective, so you will need to demonstrate how you comply with every CASS rule affecting the firm. This means putting together a matrix of all CASS rules, and the corresponding system or control which the firm has in place to comply with them. This is by far the biggest task you will need to undertake as a result of the new rules, and you should be in discussion with your auditors about how their approach will change this year.

The audit will focus much more on the controls and procedures, so you will need to demonstrate you have everything in place to comply with the CASS rules.

This is also true in the situation where you have a Third Party Administrator, as you will need to demonstrate adequate oversight that they are complying with the CASS rules (as although it is outsourced, ultimate responsibility lies with your firm).

Derivative Reporting

The reporting window for the Derivative Use Reports opened on 31 October 2016 with GABRIEL being available to receive submissions on 21 November 2016. The “Derivatives Use Reports” requires UK authorised fund managers and UK management companies to notify the FCA of their use of derivatives in UCITS schemes. (COLL 6.12.3A).

CRD IV Remuneration Rules

In 2015, remuneration rules as a result of Capital Requirement Directive (CRD) IV came into effect. The FCA has now released a consultation paper (CP16/28) which proposes to clarify the rules for firms within the scope of CRD IV (if you complete COREP Returns this applies to you). There were some inconsistencies between the EBA rules and the FCA handbook and these are proposed to be amended. If you’re unsure on an aspect of remuneration as a result of CRD IV, this consultation paper may offer some clarity.

Benchmarks Regulation

From January 2018, legislation comes into effect covering benchmark indices across the EU. The FCA already oversees a number of benchmarks, and these rules will add to that. Firms which create benchmarks will be subject to new oversight and rules to ensure consistency.

Advice Unit

From January 2017, the FCA have launched its ‘advice unit’ for firms wishing to develop innovative financial services products, and to help them stay within the regulatory regime.

Contract for Difference (CFD) Products to retail investors

The FCA undertook a survey and found that large numbers of retail customers who bought CFDs didn’t fully understand them and what they were buying. The FCA is proposing to tighten the rules around selling CFDs as a result. These proposals include limits on leveraging and enhanced information disclosed to investors. It also proposes to bring ‘binary bets’ into scope of the FCA.

Advising on P2P Investments

Firms who had permission to advise on investments, will now notice that they have “advising on Peer to Peer (P2P) investments” automatically added to their permissions. P2P Investments have now become within the scope of the FCA. If you don’t want to keep permission to do this, you need to file a “variation of permissions” application with the FCA, to remove it.


This comes into effect in January 2018 and the FCA has released a series of consultation papers on the various areas of the handbook which will be affected. The first policy statement (which are the finalised rules) will be published in March with the remainder in June.

We have covered the main changes resulting from MiFID II in previous updates, but please get in touch, or contact your FCA consultant if you have any queries to ensure you are compliant in time for the new rules next year.

Specific advice should be obtained before taking action, or refraining from taking action, in relation to the above. If you would like advice or further information, please speak to your usual Shipleys contact.

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