Client Affairs
Investment Managers Not Ready For Client Money Protection Rules - KPMG

Consultant KPMG has warned that investment managers have underestimated the funding impacts of the latest changes by the Financial Conduct Authority’s on client money protection.
Consultant KPMG has warned that investment managers have
underestimated the funding impacts of the latest changes by the
Financial
Conduct Authority on client money protection.
The FCA’s Client Money and Asset Protection (CASS) new rules
concern how firms look after money and assets that they hold on
behalf of clients to prevent misuse and allow their return in the
event of an insolvency. The rules continue to remain a focus area
for the regulator over five years on from the issues identified
in the winding down of Lehman Brothers and other subsequent
failures.
KPMG's lastest report found that some firms are worryingly
underestimating the impact the rules will have on their
businesses as they work towards full compliance on 1 June next
year.
Many surveyed failed to understand the significant implications
the regulation would have on funding arrangements and challenges
to the current business models employed by management companies.
The impact on funding arrangements means that investment managers
may need to raise more capital to meet their liabilities,
potentially impacting on shareholder return, the consultant
adds.
“While we are almost half a year away from the FCA’s deadline for
CASS, given the timeline needed to design, implement and test new
business processes, firms must take a more proactive approach to
ensure they are fully compliant in advance of June. There is a
heavy reliance on administrators and service providers to get
this right, but firms need to engage to understand the full
impacts on their business models,” said Paul McKechnie, senior
manager, investment management at KPMG.