How to develop a Client Assets (CASS) policy

Why you need a CASS policy

If your firm receives or holds money or assets on behalf of clients, you must create a formal Client Assets (CASS) policy to comply with the Financial Conduct Authority (FCA) rules. The primary goal is to ensure that client money is strictly segregated from your business's own funds, protecting those assets so they can be returned promptly if your firm ever fails or becomes insolvent.

Core Requirements of your CASS Policy

The FCA's Client Assets Sourcebook (CASS) is detailed, but for most small to medium-sized firms, your policy must focus on three "golden rules": segregation, reconciliation, and accountability. Your policy document should clearly outline how you handle each of the following:

• Segregation of Funds: You must keep client money in a dedicated "Client Bank Account" at an authorised bank. This money must never be mixed (co-mingled) with your firm's operational cash.
• Daily Reconciliations: You need a process to check that the records you have (what you think you hold for clients) match the bank's records (what is actually in the account). This must usually be done every single business day.
• CASS Oversight: You must appoint a specific individual (usually a Senior Management Function or SMF) who is personally responsible for ensuring the firm follows CASS rules.
• Trust Letters: You must have a formal "Trust Letter" from any bank holding client money, acknowledging that the money belongs to the clients and not to your firm.

Step-by-step: How to build your policy

1. Determine your CASS firm type

The FCA categorises firms as "CASS Small", "CASS Medium", or "CASS Large" based on the amount of client money or assets held. Most new startups will fall into the "Small" category, which has slightly less burdensome reporting requirements, but the core safety rules remain the same.

2. Define the segregation process

Detail exactly how money enters and leaves your firm. Your policy should state that any client money received must be paid into a designated client account by the end of the next business day. It should also list which specific bank accounts are used and confirm they are correctly named (e.g., "XYZ Wealth Ltd - Client Account").

3. Outline the reconciliation procedure

This is the most technical part of the policy. You must describe:

• Internal Reconciliation: Comparing your internal client records against each other.
• External Reconciliation: Comparing your internal records against the bank statements.
• Resolution: How you will fix any discrepancies (and within what timeframe—usually the same day).

4. Assign responsibility

Explicitly name the person responsible for CASS oversight. In a small firm, this is often the CEO or the Compliance Officer. Their job is to monitor the daily reconciliations and report any "breaches" (failures to follow the rules) to the FCA.

Important: If you identify a shortfall in a client account during reconciliation, your firm must immediately use its own money to bridge the gap while the error is investigated. Your policy must state where this emergency funding will come from.

Best Practices for CASS Management

Action	Benefit
Automate Reconciliations	Reduces human error and ensures the daily deadline is met.
Staff Training	Ensures everyone knows never to pay a client check into the business account.
Regular Audits	An external CASS audit (if required) is much easier if your policy is followed daily.

Final Checklist

Before you finalise the document, ensure it answers these questions: Who is in charge? Which banks are we using? How often do we check the balance? What happens if we find a mistake? Once drafted, this policy should be reviewed and approved by your Board of Directors or the firm's Principal.