CASS 6 vs CASS 7: Safe Custody Assets and Client Money Explained

Table of Contents

• • Side-by-side comparison
• • CASS 6: protecting safe custody assets
• - Registration and ownership
• - Third-party custody
• - Custody records and reconciliations
• • CASS 7: protecting client money
• - Segregation
• - Allocation and records
• - Client money calculation and reconciliation
• • Where CASS 6 and CASS 7 interact
• • Shortfalls: similar word, different operational problem
• • Governance connects both chapters
• • Five scenario questions to ask yourself
• • Final takeaway

CASS 6 and CASS 7 share one purpose—protecting client property—but they apply to different things and use different operating processes. For the CISI Client Money and Assets exam, confusing the two can turn a familiar rule into the wrong answer.

Shortest distinction: CASS 6 is primarily about safe custody assets. CASS 7 is primarily about client money. Identify the property first; then apply the relevant records, segregation, reconciliation and shortfall rules.

Side-by-side comparison

Point	CASS 6	CASS 7
Main subject	Custody rules	Client money rules
Property	Financial instruments and other safe custody assets within scope	Money received or held as client money within scope
Protection objective	Safeguard ownership rights and minimise loss, misuse, fraud or poor administration	Ensure proper accounting, treatment and protection of client money
Holding structure	Registration and custody through the firm or third party	Client bank accounts and, where applicable, client transaction accounts
Record focus	Which assets are held, for which client, where and under whose registration	How much client money should be held, for whom, and where it is segregated
Reconciliation focus	Custody records and actual third-party or physical positions	Client money resource and requirement, plus bank/account records
Typical problem	Missing or wrongly registered asset, custody shortfall	Unallocated receipt, segregation error, client money deficit

This table is an exam framework, not a reason to force every authority over client property into CASS 6 or CASS 7. If the firm can give instructions on a client’s own account but does not hold the money or asset, test whether the facts describe a mandate before applying segregation or custody rules.

CASS 6: protecting safe custody assets

The FCA CASS 6 custody rules require firms within scope to make adequate arrangements to safeguard clients’ ownership rights, especially if the firm fails, and to prevent unauthorised use of client assets. Organisational arrangements should reduce loss or diminution caused by misuse, fraud, poor administration, inadequate records or negligence.

Registration and ownership

An exam scenario may ask in whose name legal title is registered and whether client ownership can still be identified. Nominee and third-party structures do not eliminate the need for accurate client-level records.

Third-party custody

When a firm deposits assets with a custodian or sub-custodian, it needs an appropriate selection and oversight process. Consider expertise, market practice, legal environment, insolvency consequences and the contractual framework. Outsourcing the physical holding does not outsource accountability for the firm’s own duties.

Custody records and reconciliations

Internal records should show each client’s entitlement and the location of assets. External records show what a custodian, depository or other third party actually holds. Comparing them can reveal timing differences, booking errors or an actual shortfall.

CASS 7: protecting client money

The FCA CASS 7 client money rules support Principle 10 by requiring proper accounting and treatment of money received or held for clients. The first question is always whether the money falls within the client money rules in the particular scenario.

Segregation

Client money is generally separated from the firm’s own money in the appropriate account structure. Segregation reduces the risk that client balances are treated as the firm’s property or used for its operations.

Allocation and records

A receipt must be identified and allocated appropriately. Records should show the amount due to each client and explain transactions and balances. Unallocated or unidentified receipts require controlled treatment; they cannot simply be ignored because the client name is temporarily unknown.

Client money calculation and reconciliation

The firm compares the client money it should protect—the requirement—with the resource represented by the client money arrangements and records. Internal and external reconciliation processes help identify differences. The exact method and timing depend on the rules and the firm’s approach, so avoid using a vague phrase such as “do a reconciliation” without knowing what is compared.

Where CASS 6 and CASS 7 interact

Real events can move between securities and cash. A dividend arises from a custody asset but may become client money when received for the client. A failed delivery-versus-payment transaction can also create temporary interactions between asset and money protections.

This does not merge the chapters. It means you must follow the property as it changes form:

1. What is held now—an asset or money?
2. Why is the firm holding it?
3. Which rule applies at this stage?
4. Which record should show the client’s entitlement?
5. What reconciliation or segregation action follows?

Shortfalls: similar word, different operational problem

A custody shortfall means the recorded client entitlement is not fully matched by assets held. A client money shortfall means the protected money resource is insufficient relative to the applicable requirement or records. Both demand prompt investigation, but the booking, protection and resolution steps differ.

Do not jump straight from “difference” to “loss.” A discrepancy may be a timing or recording issue. The control process establishes the cause, determines whether a shortfall exists and triggers the required correction and escalation.

Governance connects both chapters

Effective CASS control requires named responsibility, policies, trained staff, accurate systems, escalation, audit and records suitable for an insolvency scenario. The CASS resolution pack helps make critical information available if a firm fails, supporting the return of client money and assets.

In exam questions, distinguish the first-line processing control from oversight or independent assurance. All can be important, but only one may be the immediate next action.

Five scenario questions to ask yourself

1. A firm receives sale proceeds for a client: when and how do the client money rules apply?
2. A custodian statement shows fewer shares than the firm’s client records: which CASS 6 control identifies and investigates the difference?
3. An unidentified bank receipt arrives: how should it be controlled while allocation is investigated?
4. A firm appoints an overseas sub-custodian: what selection, agreement and oversight issues arise?
5. A custody asset generates a cash dividend: at what point does the operational focus move from CASS 6 to CASS 7?

If you can answer by identifying property, role, record, control and action, you are applying the rules rather than reciting them.

The CISI Client Money and Assets preparation page maps these concepts to the current seven-chapter syllabus.

Final takeaway

Remember the distinction, but learn the process. CASS 6 safeguards custody assets; CASS 7 safeguards client money. In every question, identify what the firm holds, why it holds it and which records and controls should protect the client at that precise stage.