Case study – Independent CASS review – Global Asset Manager

Cordium was engaged to undertake a full CASS review for a client.  The review covered CASS 7 Client Money, CASS 7a Client Money Distribution and CASS 6 Custody rules, but also considered CASS 8 Mandates. The engagement involved identifying the clients’ client money touch-points, understanding the firm’s procedures and undertaking testing of compliance with the CASS rules. A number of recommendations arose.

As a second stage Cordium was appointed to assist the Firm document a User Guide that would be made available to external parties, such as then FSA or external auditors, providing a comprehensive explanation on how the client complies with the CASS rules. The engagement required interviews with client money and client asset operational staff, documentation and cross referencing to the firms policies and procedures.

The engagement required detail knowledge of CASS and its application in a multi-million pound investment management environment. It required end to end understanding of the client money and assets identification, accounting and reconciliation procedures and understanding of the client’s reconciliation arrangements that, whilst not formatted identically to the layout in CASS Annex, nevertheless, provided controls over client money commensurate with the regulator’s requirements. Cordium deployed consultants with accounting, investment management and client money experience to understand the firm’s processes, conduct the review, present to senior management and prepare the user guide.

Cordium agreed scope with the client and undertook business analysis with the client’s staff. Cordium documented the firm’s existing procedures and benchmarked these against our understanding of the CASS rules and their application in an investment management firm. Detail substantive testing was performed as necessary to substantiate our opinion on the quality and effectiveness of CASS controls.

The client’s client money reconciliation process had been subject to criticism as not complying with CASS Annex 1. Cordium evaluated that the reconciliation was compliant with the CASS rules but the documentation and presentation of the process required improvement. Cordium encouraged the client to focus more on the communication and presentation of how its fundamentally sound client money arrangements met with the CASS rule requirements and in raising the profile of CASS compliance across the firm.