Getting with the Program

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It can feel pretty frustrating for regulated firms trying to implement all the new CASS requirements. The truth is that they are dependent on so many third parties whose objectives are not necessarily aligned with those of the firms. Sometimes it feels as though they are also not aligned with the client protection objectives of the FCA either.

A few examples:
• Auditors who refuse to sign off any non-standard reconciliation methods (even when these have been in operation for years) on the basis that they do not want to take on the responsibility and liability of providing a reasonable assurance report.
• Custodians who refuse to place the firm’s client money into client transaction accounts while they are holding it – and refuse also to provide information timely enough for firms to fund for any failed settlements.
• Banks who refuse to take on any new client money accounts, even from existing customers, because they can no longer make any money from them.
• Suppliers who refuse to take on the reconciliation and control processes for any new client money or transaction accounts.

This may seem like an attempt to palm off responsibility for the regulatory compliance which sits firmly in the lap of the firms. The FCA requires firms to take control of their own destinies and to shoulder the responsibility for the protection of their clients. That all sounds fair enough; however, the reality is that in all the cases cited above the other parties generally have far more power than the firms who have been tasked with managing them. There just aren’t that many audit firms, custodians, banks or suppliers active in this market with whom firms can do business. They are often so large – and/or the firm’s business is so small, relative to the firm that there’s not much in the way of negotiation to be had. And if a couple or more of these players are taking the same stance, there’s not much choice either. Even if you could change the cost may be prohibitive.

In the wake of the upcoming competition role of the FCA, it’s interesting to reflect on how little they choose to do today, in support of firms who are trying to comply.

If you are experiencing these issues and would like to chat, do get in touch!

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