Clients’ Money Regulations and guidance – update

By ICAS

25 September 2020

The Clients’ Money Regulations were updated earlier this year – review the changes and guidance so that you understand your responsibilities.

What are the Client Money Regulations?

The Clients’ Money Regulations define Clients’ Money as any form of money, or currency, which a firm holds or receives, for, from or on behalf of a client. This includes money held by a firm as stakeholder and estate money held by an Insolvency Practitioner licensed by ICAS.

The Client Money Regulations therefore set out the definitions and provisions that apply to all offices of firms in relation to Clients’ Money.

What changes have been made and why?

The Clients’ Money Helpsheet and Guidance was amended following the release of an updated version of the Clients’ Money Regulations, published in March 2020. A summary of the key changes is provided in the table below. For the most part, paragraph wording and structure has been simplified throughout, removing statutory references, while the explanatory notes have been removed and included in the separate Clients’ Money Helpsheet and Guidance document (these changes have not been noted in the table below).

The helpsheet is intended to assist members in understanding the Clients’ Money Regulations, and their associated responsibilities, by including some further definitions and explanations as well as a useful summary of the most asked questions.

Regulation	Amendment
2.1 to 2.3 – definition of Clients’ Money	Sections have been moved elsewhere as they do not form part of the definition of ‘Clients’ money’: -Currency requirement has been moved to 4.3. -Control over bank account has been moved to 4.7.
3.1 – definition of a Bank	Wording has been updated from the ‘definitions of a bank’ used by the FCA and PRA to better reflect the banks which might be used both inside and outside of the UK.
3.2 – definition of a Client Bank Account	Additional reference to insolvency accounts included.
3.3 – definition of a Firm	Wording added to cater for insolvency practitioners.
Definition of Notice and Principal	These definitions have been removed from the Regulations as it is deemed unnecessary given the general understanding of these terms.
4.4 – requirements for opening a Client Bank Account	Additional wording at 4.4.5 provided in relation to the bank’s terms and conditions clearly stating that the conditions are satisfied to remove the need for a confirmation letter.
4.5 – requirements where the Bank does not acknowledge the required conditions	Stated timescale amended from 20 to 30 days and the requirement to close the account has been removed.
4.6 – holding Clients’ Money outside of the UK	One of the previous requirements stating Clients’ Money may not be protected as effectively in a Bank outside of the UK has been removed as this is difficult to argue if they satisfy the conditions at 4.5.
5.1 – timescale for paying into a Client Bank Account	Precise timescale included - ‘no later than the end of the following business day’ to avoid misinterpretation.
5.3 – breach of Regulations	Paragraph wording simplified to make it clear that any incorrect payments should be addressed immediately.
7.4 – withdrawal for the payment of fees	Paragraph wording has been amended to allow clients to agree shorter periods for fees to be taken and further wording added on approval by the Principal of the Firm (or delegated authority).
10 – The Responsibilities of a Principal	Section changed from ‘Returns and Reports’ as it is considered a more appropriate heading for the Regulation. The responsibilities within this section fall upon the Principal.
10.1 to 10.2 – requirement for returns to ICAS and annual reviews of compliance	Additional wording included to comment on future, as well as past, compliance. Removed the suggestion on who should carry out the compliance check.
10.3 - breach of Regulations	Reporting breaches is now a standalone requirement to give it more prominence, in line with other ICAS Regulations.
10.4 to 10.5 – ensuring compliance	New requirements to reflect similar provisions in other ICAS Regulations.
11 – Alternates	Section changed from ‘The Responsibilities of a Principal’ as it is considered a more appropriate heading.
11.4 – notification requirement	Period of notification has been changed from ‘within three months’ to as soon as is reasonably practicable.
12.1 to 12.6 – unclaimed funds/ untraceable clients	Paragraph wording has been expanded across six regulations to include provisions for the rest of the UK and elsewhere, not only Scotland.