This consultation paper seeks feedback on a number of aspects of the client assets regime, in particular regarding the client money distribution rules and their interaction with the special administration regime.
Following the failure of Lehman Brothers International (Europe) in 2008, HM Treasury created an insolvency regime for investment firms called the special administration regime (SAR). The SAR works with the client assets sourcebook (CASS), and in particular the client money distribution rules (CASS 7A), to provide a mechanism under which client assets can be returned to clients in the event of an investment firm failure.
HM Treasury commissioned Peter Bloxham to undertake an independent review of the SAR. The Bloxham Final Report was published in January 2014 and contained a number of recommendations relating to the SAR regulations, CASS and the procedures administrators follow in the event of an investment firm failure.
In March 2016, we published DP16/2 which discussed possible changes to CASS, in particular CASS 7A, as a result of the Bloxham Review. On the same day, HM Treasury published a consultation paper on proposed changes to the SAR regulations.
HM Treasury has now published amendments to the SAR regulations. Following these amendments, this consultation paper seeks feedback on proposed changes to CASS affecting the return of client assets. This includes re-consulting on some CASS 7A changes consulted on in CP13/5. It also explains why certain proposals in CP13/5 and DP16/2 are not being taken forward.
In addition, this consultation seeks feedback on minor consequential changes to the client money rules (CASS 7) and CASS 7A to address the forthcoming indirect clearing requirements the European Market Infrastructure Regulation (EMIR) and Markets in Financial Instruments Regulation (MiFIR) Regulatory Technical Standards (RTS).
At the time of publishing this consultation, the RTS have not been adopted by the European Commission and are currently in draft form (as published by ESMA in its final report on indirect clearing arrangements under EMIR and MiFIR). We will review, and make any necessary adjustments to our proposed changes, once the RTS have been adopted by the European Commission and published in the official journal of the European Union.
This consultation is relevant to all regulated firms that hold custody assets and/or client money in relation to investment business and in particular:
The topics discussed in this consultation paper will affect investment firms and their clients in the event of an investment firm failure, as well other types of pooling events.
Please send us your comments by the following dates:
You can also:
Following consideration of feedback to this consultation paper, we aim to publish a policy statement in Summer 2017.