The Financial Conduct Authority (FCA) regulates entities that hold client assets and rules around their safeguarding are contained in the FCA’s Client Assets Sourcebook (CASS). The CASS requires those firms that hold client assets to hold them separately from their own to minimise the risks of loss to their clients in the event of insolvency.

Where an entity holds client assets the FCA’s Supervisory Manual (SUP rules) require the CASS auditor, annually, to provide a Reasonable Assurance Client Assets Report and to report, among other things, on whether the entity has adequate systems in place to safeguard their client assets. Where an investment business claims not to hold client assets, a Limited Assurance Report is required.

The Standard Providing Assurance on Client Assets to the Financial Conduct Authority aims to improve the quality of CASS audits and other CASS assurance engagements and to support auditors when undertaking these type of engagements. It is also intended to support the effective training of CASS auditors by both the accounting bodies and other training organisations in line with the FCA’s recent strengthening of its client asset regime.

The new Standard establishes requirements in respect to:

• The process for forming, and the expression of, reasonable assurance opinions; 
• The process for forming, and the expression of, limited assurance opinions;
• The provision of reasonable assurance to the FCA with respect to a firm’s proposed adoption of the alternative approach to client money segregation and a non-standard method of client money reconciliation; and
• CASS auditor confirmations in respect of non-statutory client money trusts.

The new Standard will be effective for reports to the FCA with respect to client assets covering periods commencing on or after 1 January 2016, with early adoption permitted.

The press release and Standard are available on the FRC website.