8CASS – Client Assets and Client Money
In this chapter, we begin by examining the link between the Financial Crisis – in particular, the Lehman Brothers' collapse – and the introduction of the updated UK Clients Assets Sourcebook (CASS) rules, as well as subsequent FCA enforcement. We then go on to cover the content of the CASS rules themselves as well as the interconnectivity between CASS and other regulatory requirements. The legal data requirements involved with CASS compliance are, of course, also considered.
The Collapse of Lehman Brothers
In the aftermath of the collapse of Lehman Brothers, the shortcomings that client protections afforded to investors in the UK prompted a group of the largest US hedge funds to call on the Bank of England to intervene to free an estimated £38 billion in assets frozen in London during the collapse, warning that delays ‘could be disastrous for UK plc’. The warnings came as hedge funds were starting to shift billions of dollars of assets out of London to the USA, claiming that the US legal system provided greater client protection, with Richard Baker, a former Congressman and Chief Executive of the Managed Funds Association, writing a letter in the second half of 2008 to the then Governor of the Bank of England, stating:
Prime brokerage clients are already withdrawing their assets from the UK prime brokers/UK branches of overseas prime brokers … calling into question the future of the UK prime brokerage market.
The collapse of Lehman ...