DFSA releases CP-160 - updates to the Client Assets Regime

CP-160 - Addressing the Clients Assets Regime

The Riffle

The proposals in this paper are intended to provide more clarity on what the DFSA requires from: (i) Authorised Firms that fall within the scope of the Client Assets regime; and (ii) Registered Auditors that prepare Client Asset Auditor’s Reports.

Overall, the proposals in this Consultation Paper are designed to take into account the principle of proportionality, and are aimed at:

a) providing greater clarity on the Client Assets regime for Authorised Firms that are Providing Custody or are holding or controlling Client Assets;

b) enhancing specific areas where greater protection of Client Assets is desirable;

c) introducing new requirements, where necessary, i.e. in relation to crisis preparedness; and

d) providing a regulatory framework which is proportionate to the risks associated with their activities.

Key changes include:

• broadening the circumstances in which an Authorised Firm will be controlling Client Assets

• clarifying the requirements that apply to an Authorised Firm that only controls Client Assets 

• clarifying that Investments and Crypto Tokens that are Fund Property are not Client Investments or Client Crypto Tokens, respectively and, as a result do not fall within the Client Assets regime

• introducing a requirement for Authorised Firms to compile and maintain a Client Asset crisis preparedness pack to facilitate Client Assets being promptly identified and returned to Clients in a crisis situation

• clarifying what Client Assets aspects the Registered Auditors should assess for the purpose of preparing Client Assets Auditor’s Reports

• converting the Third Party Agent suitability assessment criteria from guidance to Rules and expanding some of the criteria

• changing the timing by which the written acknowledgment for Client Money accounts should be received from Third Party Agents

• improving Client Money disclosure Rules by: (i) requiring more detailed disclosures about the treatment of Client Money held with Third Party Agents; (ii) requiring Authorised Firms to make additional information available to Clients upon request about insolvency regime assessments in jurisdictions where Third Party Agents are located; and (iii) requiring disclosure to be made before the Client passes Money to the Authorised Firm

• amending the Rules to require more frequent reconciliations of Client Assets and clarifying that Client Assets should be recorded and reconciled on a settlement date basis

• clarifying the frequency of Client reporting and reflecting technological developments

• providing more flexibility around naming Client Accounts, and

• clarifying the requirements that apply when an Authorised Firm is Arranging Custody.

The deadline for providing comments on this Consultation Paper is 20 October 2024.