On March 9, 2016, the FCA issued a discussion paper on client money rules (CASS 7) and the Special Administration Regime Review. The discussion paper is relevant to all regulated firms that hold client assets or money for investment business. Client money rules govern how client assets are to be distributed by an insolvency practitioner managing a failed investment firm. The discussion paper is in response to the recommendations made in the Bloxham Final Report which aims to improve the speed of return of client assets and minimize the market impact of a failed firm's entry into special administration. The Report, commissioned by HM Treasury, contained a number of recommendations relating to the Special Administrative Regulations, the CASS rules and the procedures administrators follow in the event of an investment firm failure. The discussion paper also outlines the FCA's response to the 'speed proposal' and why, for reasons relating to accuracy of firm records and insolvency practitioner liability, is not being implemented. The speed proposal outlined the ability to distribute client money quickly following the failure of a firm, based on the records of the firm. Responses to the discussion paper are due by May 9, 2016. HM Treasury published a consultation paper on March 9, 2016, on reforms to the investment bank SAR, in response to the Report, and should be read in tandem with the FCA discussion paper mentioned above. The HM Treasury consultation paper states that the government fully supports the aims of the recommendations of the Report.
The FCA discussion paper is available at: http://www.fca.org.uk/static/fca/documents/discussion-papers/dp16-02.pdf .
The Bloxham Report is available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/ 190983/peter_bloxham_review_of_investment_bank_sar2011_.pdf.
HM Treasury's consultation paper is available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/506136/_PU1896__SAR_Consultation.pdf.
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