FSA amends co-mingling rules

The FSA is to amend its rules on the co-mingling of client money following concerns of the industry on its original proposals.

Following the changes, the FSA said it would allow firms to hold in a client bank account, client money and money it holds as agent of an insurer (i.e. so-called co-mingling of these monies).

But for this amendment to apply, the insurer will have to give his consent in writing and accept that his claim to such monies should be subordinated to actual clients' claims.

The FSA said such consent could form part of the firm's written agreement (whether this be a bespoke agreement or standard terms of business) with the insurer required to be in place under CASS 5.2.3R.

But it warned that the proposal allowing co-mingling would not alter the position of insurers who will continue to bear the risk of money being lost while in the control of any intermediary firms they authorise to hold their money as agent.

“Nor does it alter the fact that intermediary firms must not agree to hold money as an insurer's agent without establishing a written agency agreement with the insurer formalising the arrangement, again in line with CASS 5.2.3R,” said the FSA.

The proposals also continue to leave insurers with the option that they may stipulate that money collected by their intermediary agents should be segregated in a separate bank account in their favour, it said.

Further information on the amended proposals included in CASS 5 can be found at www.fsa.gov.uk/mgi/publications_homepage.html