Information on return of client assets - June 2022

My questions refer to the Enhancing Market Integrity section of the FCA website: https://www.fca.org.uk/about/enhancing-market-integrity and specifically the third bullet point which reads "there is orderly resolution and return of client assets".

Under the Freedom of Information Act 2000, could you please respond to the following points in writing to my address (above):

- Is it a requirement for all regulated firms to comply with the third bullet point (as above)?

- How does the FCA assess and enforce an orderly resolution and return of client assets?

- Based on the most recent data, how many and what percentage of regulated firms comply with this?

- What percentage of unclaimed assets are returned to their owners each year?

- What happens to those firms that do not comply with the above?

- How does an individual identify pools of unclaimed assets? There does not appear to be a complete and up-to-date register available.

- Is any information made publicly available which will allow a private individual to trace the beneficial owner of unclaimed assets?

Question 1

Is it a requirement for all regulated firms to comply with the third bullet point (as above)?

The statement in the third bullet point is not a requirement or a rule imposed on regulated firms, but an objective of the FCA to support its statutory objective of protecting and enhancing the integrity of the UK financial system under section 1D of the Financial Services and Markets Act 2000 (FSMA).

Question 2

How does the FCA assess and enforce an orderly resolution and return of client assets?

FCA regulated firms that hold or control client money or safe custody assets (collectively ‘client assets’) as part of their business must follow the client asset rules set out in the Client Assets Sourcebook (CASS[1]).  This is to allow client assets to be returned as quickly and as whole as possible to clients if a firm enters an insolvency process.  CASS currently applies to the following types of firms: investment firms, general insurance intermediaries, debt management firms and claims management companies. A firm that enters an insolvency process remains subject to the FCA’s rules, including the CASS rules. If a firm holding client assets enters an insolvency process, an insolvency practitioner should make sure that such assets continue to be treated in line with CASS and, in particular, follow the post-failure rules for returning client assets. Insolvency legislation also has certain provisions that set out how insolvency practitioners appointed over firms that hold client assets should deal with them. 

Question 3

Based on the most recent data, how many and what percentage of regulated firms comply with this?

The FCA does not hold any quantitative data on this aspect of your request.

Question 4

What percentage of unclaimed assets are returned to their owners each year?

We are unable to respond to this question as we do not hold information on the percentage of assets which Insolvency Practitioners are able to return.  

If an insolvency practitioner is appointed over a regulated firm, the insolvency practitioner takes control of the firm which continues to have regulatory obligations. If a firm holding client assets enters an insolvency process, an insolvency practitioner should make sure that such assets continue to be treated in line with CASS and, in particular, follow the post-failure rules for returning client assets. As noted above, CASS requires firms to hold client assets in a way that is intended to allow such assets to be returned as quickly and as whole as possible to clients if a firm enters an insolvency process.

Question 5

What happens to those firms that do not comply with the above?

Firms are authorised on the basis that they can comply with the relevant requirements at all times.  Where firms are holding or controlling client assets as part of their regulated business, CASS will apply.  The FCA supervises firms’ compliance with the CASS rules and where non-compliance is highlighted by a firm’s auditor, or in the course of an FCA assessment, actions will be set for the firm to address.  If firms are found to have unclaimed assets, then these may fall under a remediation plan.  There may be instances where firms are required to trace clients in order to send money and/or assets back to clients as part of that remediation plan. More generally, as a going concern, firms are permitted to pay away unclaimed client assets to a registered charity providing certain conditions are met in the CASS. If a firm is not able to comply with these provisions, they can consider applying for a waiver or modification of the relevant rules but will need to evidence that they satisfy the statutory tests in FSMA for granting a waiver or modification.

Question 6

How does an individual identify pools of unclaimed assets? There does not appear to be a complete and up-to-date register available.

Insolvency Practitioners appointed over failed firms which hold client assets will attempt to contact clients to request that that they make a claim, typically by e-mail or in writing and by advertising in the press.  However, clients should retain their own records to ensure they are aware that they should make a claim in the event they become aware a firm has failed.  There is no public register of unclaimed assets.

Question 7

Is any information made publicly available which will allow a private individual to trace the beneficial owner of unclaimed assets?

We are not aware of any.