Safe Custody Investments: Requirements imposed by CASSswati
Why Safe Custody Investments is required?
Assets are an item or property or which creates a value to the business that has worth and is needed to operate the business. Assets are important to the business because it helps in generating value, increase the total value of business ensures the business runs smoothly. Assets are to be safeguarded, maintained, and protected.
Safeguarding assets are required to prevent and detect timely unauthorized acquisition, use, or disposal of the company’s assets which will have a material effect on the financial assets. For example, Company does inventory checks periodically and detects if there is any misstatement in the records and actual count.
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What is a safe custody asset?
Safe custody asset as per the Financial Conduct Authority (FCA) is :
- A financial instrument related to markets in financial instruments directive (MiFID) business or,
- A safe custody investment not related to MiFID business
- Acting as trustee or depositary of an alternate investment fund (AIF), an AIF custodial asset or,
- A safe custody investment related to a small alternate investment fund manager (AIFM) or
- Acting as depositary for Undertakings for Collective Investments in Transferable Securities (UCITS)
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Client Assets Sourcebook (CASS) Custody Rules for Safe Custody Investments:
The Financial Conduct Authority (FCA) has created client assets sourcebook (CASS) which contains rules related to safe custody assets or client money held by another firm. As per the Custody rules requirements while holding client assets are:
- A firm when holds safe custody assets belonging to clients, it should make adequate arrangements to safeguard them. In the case of a firm’s insolvency, it should not use safe-custody assets of clients to fulfill their obligation unless the client gives consent to use. CASS is there to ensure assets are safe if such an event occurs.
- A firm has to ensure adequate protection is provided for the client’s assets to minimize the risk of loss or diminution in the value of an asset.
- A firm must register or record the legal title of safe custody asset of the client in the name of:
- The client or authorized person of the client.
- A nominee company
- Any other third party when the firm is not a trustee firm and is prevented to register or record the legal title of the -asset.
- The firm trustee firm or not is prevented to register or record the legal title of the asset.
- A firm must see it follows custody rules concerning the client’s asset as it would in case of its nominee company controlled by itself or by an affiliated company.
- A firm may register or record the legal title of its asset in the same name as that of the client’s safe custody asset. This can be done only when the firm’s asset can be separately identified from the client’s safe custody asset and also it has to meet the other criteria set by FCA.
- A firm must ensure the documents of title belonging to the firm and it has physical possession of it, must be kept separate from the documents of title belonging to the client’s safe custody asset.
Author: Swati Krishnamurthy
About the Author:
Swati is a freelance writer. She is a Financial Quality Compliance specialist having integrated knowledge and experience in Logistics, Audit, and Risk-mitigation for manufacturing and service sectors. Her passion for finance grew as she scored centum in financial management during her master’s degree. She’s a classical dancer who performs to express complex emotions through her dancing and writes to express complex concepts into simple words.