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The FCA PS14/9 regulations: Coming, Ready or Not

The United Kingdom’s Financial Conduct Authority (FCA) regulation PS14/9 related to custody assets and client money has a backstop for implementation of 1 June 2015.

Compliance with the rules in the client assets sourcebook (CASS) has never been more important. There is now considerable ‘noise’ from the FCA given the short timescale for implementation, which is placing a considerable onus on firms carrying out investment business to understand and comply with the new rules. Pressure is now clearly being applied

The FCA has identified a common set of faults made by organisations for which the PS 14/9 rules have profound implications. These faults include, amongst others:

  • Client money and assets reconciliations are incorrectly performed, delayed or completely overlooked.
  • Permitting the inter-mingling of client and own monies and for this reason, paying business expenses out of client money and creating a funds shortfall.
  • A failure to submit accurate Client Money Account reports, required by their auditors.

ReconArt has implemented technology-led solutions to enable firms in this space to comply with their PS14/9 requirements regarding custody assets and client money responsibilities.

Currently, businesses are attempting to manage these complex processes manually or semi-manually. Inevitably, these practices are prone to significant levels of human error; are labour, time and cost intensive and insufficiently robust to ensure CASS rule compliance.

The FCA has made it clear that its expectations are high and has used enforcement action regularly in this area; it is likely to continue to do so. These have included everything from publicly delivered written and verbal admonishment to heavy fines.

Barclays provides a case in point. It was found by the FCA to be negligent in taking reasonable care to establish adequate and effective organisational, control and risk management systems and of keeping adequate records and performing regular reconciliations.
While there had been no actual loss of client assets, its governance failures in respect of its responsibility for £16billion of client assets resulted in it being fined £37million. This huge figure even included a 30% early settlement discount!

For some tardy organisations, all this appears to matter little, and either ignorance or intransigence has them very firmly gripped. Their inertia is both unrealistic and possibly very costly. However, this is as nothing compared with the huge issue of reputational and personal damage that could be potentially fatal for the unwary CEO and CFO and their businesses.

Ensuring you avoid the plausible emergencies that readiness for 1 June 2015, when the final stages of the PS14/9 rules come into force, is still a possibility. If you act now!

Contact ReconArt to find out more about our account reconciliation software and other reconciliation tools to help your organisation meet the June deadline.

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