18/4/11

By Sophie Baker

June’s Client Money and Asset Return (CMAR) initiative, which will allow the Financial Services Authority (FSA) to monitor Client Assets Sourcebook (CASS) firms’ client money and asset positions, is fast approaching, and medium and large firms should prepare now.

The improvements to CASS, introduced by the FSA in 2010, will see medium and large firms having to report client money and asset returns monthly through the FSA’s online system, GABRIEL, said provider of reconciliation software, AutoRek.

For the time being small firms will be exempt from this, but will still have to notify the FSA of their highest client money balance and value of client assets on a half-yearly basis, in July and January.

Firms will also now be required to keep clients’ money separate from their own – in different accounts. The idea is to protect clients’ money in the event that the firm cannot cover its debts with its assets.

Jim Muir, finance director at AutoRek Financial Data Management Solutions, said: “This addition to the FSA’s policies not only highlights its focus on the importance of protecting clients’ assets, but also shows the FSA’s reluctance to allow a repeat performance of the mistakes made in the past by some of the key players in the financial sector.”

From the summer, firms will be expected to meet detailed reporting requirements including segregation of client money, client money requirement and resource, client money reconciliations, segregation of safe custody assets, safe custody assets reconciliations and record keeping and breaches.

Regulated firms will also be required to report the number, value and age of any un-reconciled items in each return to the FSA – any firms underperforming key benchmarks in these areas can expect to face an FSA inspection.

AutoRek said that many firms are turning to integrated reconciliation and reporting software systems to manage these complex reconciliations, data migrations and suspicious transaction monitoring. Tools can be used to load and match tens of thousands of records per second, and can be used to analyse client money reconciliations, asset reconciliations and dividend and distribution reconciliations, all of which are required by these new CMAR reports.

“Modern transactional reconciliation tools like AutoRek can make the automatic preparation and analysis of Client Money reconciliations, asset reconciliations and dividend and distribution reconciliations very simple. All of this information will be vital for the successful completion of these new mandatory reports, and also help to minimise regulatory costs and disruption,” Muir added.