HomeInsightsBlogAudit and CASS Requirements for financial services

Insights

Blog // 15/11/2016

Audit and CASS Requirements for financial services

Audit Requirements for financial services including CASS
An FCA registration is a valuable thing: respectability, confidence and legitimisation come from having these three letters all over your business. However, it does come with its share of regulation. The primary legislation is the Financial Services and Markets Act 2000 (FSMA) but is also impacted upon by European directives, namely Markets in Financial Instruments Directive (MiFID) and the Capital Adequacy Directive (CAD).

The following is a brief attempt to untangle the requirements for audit and client money assurance under the FCA’s auspices.


Audit requirements for financial services

digital-tax2Following the usual small company exemptions per the Companies Act 2006 (CA06) many small financial services companies are exempt from the requirement to obtain a statutory audit however the following classes of companies/LLPs are required to have one:

  • Authorised insurers
  • Banks
  • E-money issuers
  • MiFID investment firms*
  • UCITS management firms

* Firms that satisfy regulation 4c(3)of the FSMA are also exempt from the requirement to obtain a statutory audit. i.e. if a firm could be non-MiFID, then small company exemptions apply.

Appointed Representatives (AR) are firms that are not FCA registered themselves, but ‘piggyback’ on the registration of another FCA registered company. An AR is exempt from audit provided they meet the normal CA06 criteria.


Client Money and/or Custody Assets (CASS) Assurance Requirements

digital-tax3Not-with-standing their statutory audit requirement, FCA firms may need a CASS Assurance report. There are two types of reports that may be needed, the reporting deadline for both is 4 months following the end of the reporting period. This can be up to 53 weeks long and typically is in line with the accounting year end.

  • Reasonable Assurance – a ‘positive opinion’ that the firm is correctly complying with the CASS requirements.
  • Limited Assurance – a ‘negative opinion’ that there is nothing to indicate that the firm has breached the CASS requirements i.e. held client money.

Investment Business

Ben Simpson analyses the impact of Brexit on personal investments
Investment firms need a CASS report if they are permitted to hold investment client assets (including money) and/or if they require a statutory audit.

 

  • Hold client assets – Reasonable Assurance Report
  • Statutory audit requirement but don’t hold client assets – Limited Assurance Report
  • No statutory audit requirement and don’t hold client assets – No Assurance Report

The report is sent to the FCA.


General Insurance (MGI) Business

insurance-broker
MGI firms will need a CASS report if they hold client assets that exceed £30,000 at any time or if they hold funds in a non-statutory trust. This allows credit advances to be made.

  • Hold over £30,000 of client assets – Reasonable Assurance Report
  • Assets in an NST – Reasonable Assurance Report
  • Under £30,000 held and not in an NST – No Assurance Report

The report is sent to the client (though addressed to the FCA) and the FCA may then ask to see it. It is the responsibility of the firm to identify whether they need an Assurance report, a statutory auditor is not expected to check whether there is a requirement.

Where these firms have Appointed Representatives, it is the responsibility of the FCA registered company to confirm that the AR complies with the CASS requirements.


Understanding FCA requirements

Mike Ayres_320x238The requirements of the FCA are many and complex. The above is just a brief outline of one area, we will publish future explainers to dissect CASS further, however the following articles may also be helpful in developing your understanding:

The CASS Rules and how they may apply to you.
CASS: Client money rules and implications.

If you have any questions or think we may be able to help you with your audit or assurance needs, please contact Mike Ayres by email mayres@menzies.co.uk or by phone 01252 894911.

Please note that the above information is correct as at 15 November 2016.

Print Friendly, PDF & Email


RELATED CONTENT
  • How competitive is the UK’s tax system in relation to others?

    Although the government is proud of the UK’s position with its most competitive tax system in the G20, initiatives such as the BEPS (Base Erosion and Profit Shifting) project, which has already been adopted by 124 countries, making it harder to stand out from the crowd. With tax becoming an increasingly important global topic, the […]

    Print Friendly, PDF & Email
    READ MORE >
  • Is your profit data misleading you? Part 1 – valuable insight

    Tim Dunn – Strategic Advisory Partner Developing good products and services is important, but it is not everything – commercially there are a number of pieces of the jigsaw that need to come together if a business is to achieve its potential and fulfil the owner’s dreams. Ultimately, profitability must be a key consideration – […]

    Print Friendly, PDF & Email
    READ MORE >
  • Is your profit data misleading you? Part 2 – applying to the business

    Tim Dunn – Strategic Advisory Partner In part one we examined the data challenges that face many SMEs and the power in defining what data you need and the difference between detailed analysis verses meaningful analysis. Now it’s time to consider what parts of your business you want to understand better. Stage 1 – define […]

    Print Friendly, PDF & Email
    READ MORE >