This question assesses knowledge of the specific record-keeping retention periods mandated by the UK’s Financial Conduct Authority (FCA) in the Client Assets Sourcebook (CASS). According to CASS 7.15.11R, a firm must make and retain records of its client money transactions and reconciliations for a minimum period of five years from the date on which the record was made. This requirement is crucial for ensuring a complete audit trail, allowing the FCA to conduct effective supervision, and enabling an insolvency practitioner to promptly identify and return client money in the event of a firm’s failure. The other options are common distractors in CISI exams: three years is a common general business record period but is insufficient for CASS; seven years is often associated with other regulations (like tax) but is longer than the CASS minimum; and ‘five years from the cessation of the client relationship’ relates to other MiFID requirements (e.g., KYC/AML records), not the specific rule for CASS transaction records.

This question assesses the understanding of what constitutes a comprehensive operational risk framework specifically for safeguarding client money and assets under the UK’s FCA CASS rules. The correct answer identifies the core pillars of CASS compliance, which directly address the primary sources of operational risk. Under the FCA’s Client Assets Sourcebook (CASS), a firm’s ability to manage operational risk is paramount. The correct option covers: 1. Daily Reconciliations (CASS 6 & CASS 7): This is a fundamental detective control. Failures in the reconciliation process are a major source of operational risk, as discrepancies may not be identified and rectified promptly. 2. Segregation Procedures (CASS 6 & CASS 7): This is a core preventative control. Inadequate or failed segregation processes mean client money and assets are not properly ring-fenced from the firm’s own funds, exposing them to risk in the event of the firm’s insolvency. 3. Staff Competence and Integrity (FCA’s SYSC rules): The ‘people’ element is a critical component of operational risk. Errors, negligence, or fraud by staff handling CASS functions can lead to significant breaches and client loss. 4. CASS Resolution Pack (CASS 10): This is a key regulatory requirement designed to mitigate the impact of the ultimate operational failure – the firm’s insolvency. An adequate CASS RP ensures an insolvency practitioner can quickly identify and return client assets, demonstrating a robust control for a high-impact event. The other options are incorrect because they are either too narrow or focus on different types of risk. Focusing solely on IT ignores people and process risk. The firm’s financial health (capital, profitability) relates to financial risk, not the operational controls for CASS. External market conditions are environmental factors, not the internal controls that form the management framework itself.

This question assesses knowledge of the FCA’s CASS 7 rules, specifically the requirements for establishing a statutory trust client money account. Under CASS 7.13, for a firm to hold client money under the standard approach (statutory trust), it must not only place the money in an account titled as a client account but also obtain a written acknowledgement letter from the bank. This letter, as per CASS 7.13.12R, must confirm that the bank will not exercise any right of set-off or counterclaim against money in that account for any sum owed by the firm on any other account. The firm must not hold client money with the bank until it has received this acknowledgement. The failure to obtain this letter means the fundamental conditions for a statutory trust have not been met, and the money is not being held in a CASS-compliant manner. It does not automatically become a non-statutory trust, which has its own distinct requirements, including specific client disclosures (CASS 7.13.13R). The firm’s obligation extends beyond merely sending the notification; it must receive the confirmation. There is no regulatory grace period for this critical requirement.

This question assesses understanding of the FCA’s Client Assets Sourcebook (CASS), specifically the Client Money Distribution Rules found in CASS 7A. In the UK, a cornerstone of client protection under the CISI regulatory framework is the segregation of client money from the firm’s own money, as mandated by CASS 7. When a firm becomes insolvent (a ‘primary pooling event’), this segregation is critical. The rules in CASS 7A dictate that all client money held by the firm is treated as a single pool. If there is a shortfall in this pool, the remaining funds are not paid out on a first-come, first-served basis, nor are they absorbed into the firm’s general assets for all creditors. Instead, the money is distributed to clients on a pro-rata basis, meaning each client receives a share of the pool proportionate to their individual entitlement. Only after this distribution can eligible clients make a claim to the Financial Services Compensation Scheme (FSCS) for any remaining shortfall, up to the applicable compensation limit.

Under the UK’s CISI regulatory framework, specifically the FCA’s CASS 6 (Custody Rules), a ‘safe custody asset’ is defined as any designated investment that belongs to a client and is held by a firm in connection with its investment business. The key is that the item must be both a ‘designated investment’ (such as a security, unit in a collective investment scheme, or other financial instrument) and belong to the client. In this scenario: – The physical bearer bonds are securities, which are designated investments belonging to the client. Therefore, they are correctly classified as safe custody assets under CASS 6. – The cash balance is ‘client money’ and is subject to the specific protections of CASS 7 (Client Money Rules), not CASS 6. – The piece of fine art is not a ‘designated investment’ under the FCA’s definition, so it does not fall under the CASS 6 rules, even though it is held for a client. – The firm’s own reserve of foreign currency is an asset of the firm, not the client, and is therefore not a client asset.

According to the UK’s Financial Conduct Authority (FCA) CASS (Client Assets Sourcebook) rules, which are a core component of the CISI Client Money and Assets exam syllabus, a firm has multiple reporting obligations. The primary routine report is the monthly Client Money and Asset Return (CMAR), which must be submitted within 15 business days of the reporting month-end. However, CASS 6.5.6R (for custody assets) and CASS 7.15.33R (for client money) mandate that if a firm identifies a discrepancy during its internal or external reconciliations which it is unable to resolve by the close of business on the day following identification, it must notify the FCA immediately. In this scenario, the discovery of a significant, unresolved shortfall is a material breach. The obligation to notify the FCA of such a breach ‘without delay’ or ‘immediately’ is the most urgent priority and supersedes the routine CMAR submission deadline. While completing the CMAR is necessary, and internal escalation is part of good governance, the direct regulatory reporting of the breach is the most immediate and critical action required.

This question assesses knowledge of the FCA’s CASS 6 Custody Rules, specifically concerning the registration and segregation of client assets. According to CASS 6.2.2R, a firm must ensure that any client safe custody assets are registered or recorded in the name of the client or in the name of a nominee, but not in the firm’s own name unless it is a nominee company or the assets are being held by a third party. When held by a third party, the account must be clearly identifiable as a client account. Registering an omnibus account solely in the firm’s name (‘Alpha Investments’) without any designation that it holds client assets is a direct breach. This fails to legally protect the assets from the firm’s own creditors in the event of insolvency. The other options describe compliant practices: using a properly designated client omnibus account (other approaches , holding physical assets with clear internal segregation and records (other approaches , and using an overseas custodian after performing the required due diligence and obtaining client consent as per CASS 6.3 (other approaches are all permissible under specific conditions within the CASS 6 framework.

This question assesses the candidate’s understanding of the critical risk management procedures required under the FCA’s Client Assets Sourcebook (CASS), specifically CASS 7 (Client Money Rules). The correct approach is mandated by CASS 7.17.2R, which states that a firm must, upon identifying a shortfall in its client money account, pay its own money into that account to rectify the shortfall. This must be done by the close of business on the day of discovery. Delaying the rectification, as suggested by the senior manager, is a direct breach of this rule and also contravenes FCA Principle 1 (Integrity) and Principle 11 (Relations with regulators) by attempting to obscure a compliance issue from an auditor. Initiating a root cause analysis before rectifying the shortfall is incorrect because the primary duty is the immediate protection of client money; the investigation can run in parallel or follow immediately after. Using a surplus from another account to offset the shortfall is a fundamental breach of segregation principles, as one client’s money cannot be used to cover a deficit related to another.

This question tests a fundamental requirement of the UK’s Client Money rules, as stipulated in the Financial Conduct Authority’s (FCA) Client Assets Sourcebook (CASS). Specifically, it relates to CASS 7.13.3R, which governs the timing for the segregation of client money. The rule states that a firm, upon receiving client money, must pay it into a client bank account ‘promptly and in any event no later than the business day following the receipt of that money’. In the scenario, the money is received on Monday. Therefore, the absolute latest the firm can deposit the funds into a segregated client bank account is the close of business on the next business day, which is Tuesday. The other options are incorrect as they do not align with this specific CASS 7 requirement, which is a critical area of knowledge for the CISI Client Money and Assets exam.

This question assesses knowledge of key internal control mechanisms required under the FCA’s Client Assets Sourcebook (CASS). The correct answer is the CASS Resolution Pack (CASS RP). According to CASS 10, firms are required to maintain a CASS RP. This is a specific set of documents and information designed to be readily available to an insolvency practitioner in the event of the firm’s failure. Its primary purpose is to ensure that client money and assets can be identified and returned to clients as quickly and efficiently as possible, directly addressing the gap identified in the scenario. The other options are incorrect because: The daily client money calculation (required under CASS 7) is a critical ‘business as usual’ control to ensure the correct amount of money is segregated, but it is not the overarching framework for managing an insolvency. The annual CASS audit report (required under SUP 3) is a backward-looking assurance report provided by an external auditor to the FCA; it verifies controls but is not the operational tool itself. The CASS operational oversight function (a role mandated by CASS 1A, previously known as the CF10a) is a governance control responsible for overseeing CASS compliance, including the creation of the CASS RP, but it is not the mechanism itself.

This question tests knowledge of the FCA’s CASS 6 Custody Rules, specifically concerning the use of a client’s safe custody assets for the firm’s own account. According to CASS 6.4.2R, a firm may only use a client’s safe custody assets for its own account (such as in a stock lending arrangement) if two key conditions are met: 1) The client has given their prior express consent for the use of the assets on specified terms, and 2) this consent is evidenced in writing, typically through a signed agreement. The other options are incorrect because simple notification is insufficient (CASS requires active consent, not passive acceptance), internal committee approval does not replace the mandatory client agreement, and registering assets in the firm’s own name is generally prohibited as it fails to protect client assets in the event of the firm’s insolvency.

This question assesses the candidate’s understanding of key risk mitigation strategies under the FCA’s Client Assets Sourcebook (CASS). The primary risk highlighted is concentration risk – holding a significant amount of client money with a single third-party credit institution. According to CASS 7.13.3 R, a firm must exercise due skill, care, and diligence in the selection, appointment, and periodic review of any third party with which it places client money. A crucial part of this due diligence is the consideration and mitigation of concentration risk. While increased due diligence on the single bank is a good practice, it does not solve the fundamental problem of having ‘all eggs in one basket’. Relying solely on insurance is not a primary control mechanism expected by the FCA for this risk, and simply accepting and documenting a significant, mitigatable risk is a failure of the firm’s regulatory duty to protect client assets. Therefore, the most appropriate and compliant strategy is to implement a formal policy of diversification across multiple, carefully selected institutions.

This question tests understanding of the daily client money calculation as mandated by the UK Financial Conduct Authority’s (FCA) Client Assets Sourcebook (CASS), specifically CASS 7.15. According to CASS 7.15.4 R, a firm must compare its client money resource (the actual money held in client bank accounts) with its client money requirement (the total amount it should be holding for all clients). In this scenario: – Client Money Requirement (CMReq) = £5,310,000 – Client Money Resource (CMR) = £5,250,000 The calculation shows that the CMReq is greater than the CMR, resulting in a shortfall of £60,000 (£5,310,000 – £5,250,000). CASS 7.15.14 R is the key rule here. It states that if the client money requirement is greater than the client money resource, the firm must pay its own money into a client bank account. Crucially, this payment must be made by the close of business on the day on which the calculation is performed. Therefore, the firm must immediately rectify the £60,000 shortfall by transferring its own funds into the client bank account before the end of Tuesday. Waiting until Wednesday would be a breach of CASS rules. Withdrawing funds would be the action for an excess, not a shortfall. Notifying the FCA is only required under specific circumstances (e.g., if the firm cannot make good the shortfall), but the primary obligation is to rectify the shortfall immediately.

This question assesses knowledge of the specific incident reporting requirements under the FCA’s Client Money and Assets (CASS) sourcebook, a core component of the CISI syllabus. According to CASS 7.15.4R, a firm must notify the FCA immediately if it has not performed, or is unable to perform, a client money calculation or reconciliation as required by the rules. This is a strict liability reporting obligation and is not subject to a materiality assessment. While internal escalation to the CASS oversight officer (a role mandated by CASS 1A.3) and rectifying the issue are critical internal steps, they do not replace the immediate external notification duty to the regulator. This reflects the FCA’s Principle 11 (Relations with regulators), which requires firms to be open and cooperative. Delaying notification to conduct an investigation or assess materiality would be a direct breach of CASS 7.15.4R for this specific type of failure.

This question assesses the understanding of the fundamental internal control principle of segregation of duties, as required by the FCA’s Client Assets Sourcebook (CASS). The core principle, embedded within the FCA’s overarching requirement for firms to have adequate systems and controls (SYSC), is that no single individual should have control over a transaction from initiation to completion. In the context of CASS 7 (Client Money Rules), this is critical to prevent fraud, misappropriation, and concealment of errors. The scenario describes a situation where one individual can process client money transactions (allocating funds) and also perform the reconciliation. This creates a significant control weakness. The most severe risk is that this individual could misappropriate client funds and then manipulate the reconciliation records to hide the resulting shortfall, making the theft difficult to detect. While other risks like operational errors or delays exist, the primary purpose of segregating these specific duties is to mitigate the risk of deliberate fraud and its concealment.

According to the FCA’s Client Assets Sourcebook (CASS), specifically CASS 7.13, a firm must treat money as client money if it receives it from or on behalf of a client. When a firm receives a mixed remittance (a single payment containing both client money and the firm’s own money), it must not pay it into its own business account. The correct procedure, as outlined in CASS 7.13.55 R, is to pay the entire amount into a client bank account without delay. The firm must then ensure that the portion of the payment that is firm money is paid out of the client bank account to a firm’s business account within one business day of the funds clearing. Paying the full amount into a firm account first is a direct breach of the fundamental segregation principle (CASS 7.13.3 R). Returning the cheque, while avoiding a breach, is not the prescribed operational procedure and would cause unnecessary delay and inconvenience for the client.

This question assesses the candidate’s understanding of monitoring, oversight, and the critical regulatory duty of breach reporting under the FCA’s Client Assets Sourcebook (CASS). According to FCA Principle 10, a firm must arrange adequate protection for clients’ assets when it is responsible for them. The core of this protection lies in the firm’s systems and controls, and the oversight mechanisms designed to identify and rectify failures. The scenario presents a direct conflict between commercial/reputational pressure and a fundamental regulatory obligation. The key regulation in play is found in the FCA’s Supervision Manual (SUP), specifically SUP 15.3.11R, which requires a firm to notify the FCA immediately of anything relating to the firm which, in the reasonable opinion of the firm, would be of material significance to the regulator. A failure of a primary control, such as the segregation of client money as required by CASS 7 (Client Money Rules), is almost always considered significant, irrespective of the monetary value involved. The FCA is concerned with the breakdown of the control itself, as it indicates a systemic risk to all client money held by the firm. The Head of Operations’ instruction to ‘apply more materiality’ is a dangerous misinterpretation of the rules. While materiality is a factor, it cannot be used to justify not reporting a fundamental breach of a core CASS rule. The correct action is to escalate the issue to the person with the prescribed responsibility for CASS (the SMF4 under the Senior Managers and Certification Regime) and notify the FCA promptly. Delaying the report or deciding not to report based on internal pressure would be a serious regulatory failing, potentially leading to FCA enforcement action against both the firm and the individuals involved.

Under the UK’s Financial Conduct Authority (FCA) regulations, specifically the Client Assets Sourcebook (CASS), CASS 7.15.1R mandates that a firm must keep its records and accounts related to its compliance with client money rules for a minimum period of five years from the date on which the record was made. This is a critical requirement for the CISI Client Money and Assets Exam. The purpose of this rule is to ensure a robust and verifiable audit trail exists, which can be used by the firm, its auditors, and the FCA to verify compliance, investigate discrepancies, and resolve client disputes. A policy of three years is a clear breach of CASS 7 and would be identified as a significant failing during a regulatory inspection or CASS audit.

The correct answer is focused on the primary objective of the UK’s client money and assets regime, which is governed by the Financial Conduct Authority’s (FCA) Client Assets Sourcebook (CASS). The fundamental purpose of CASS, particularly CASS 7 (Client Money Rules), is to ensure the robust protection of client money through segregation and proper controls. This protection is most critical in the event of a firm’s insolvency or failure. The rules are designed to ensure that client money is clearly identifiable and can be returned to the rightful owners as quickly and completely as possible, ring-fenced from the firm’s own funds and its creditors. The scenario describes a situation where the chosen banking arrangement, despite potential operational benefits, jeopardises the prompt return of funds, thereby violating this core CASS principle. The other options describe other important regulatory goals (AML, market integrity) or specific CASS controls (reconciliations), but they are not the overarching, primary objective that is being directly threatened by the risk identified.

This question tests understanding of the fundamental client money protection rules under the FCA’s Client Assets Sourcebook (CASS), specifically CASS 7, in an insolvency scenario. The core principle of CASS 7 is that when a firm holds money for a client, it holds that money as a trustee. This creates a ‘statutory trust’ over the client money, legally segregating it from the firm’s own money. Consequently, in the event of the firm’s insolvency, the client money does not form part of the firm’s assets available to general creditors. The insolvency practitioner’s primary duty regarding this money is to identify the beneficial owners (the clients) and facilitate the return of their funds from the segregated client money pool. The money is ring-fenced and protected specifically for the clients, which is the cornerstone of the UK’s client asset protection regime.

This question assesses the understanding of a firm’s immediate obligations under the FCA’s Client Assets Sourcebook (CASS) when an operational risk materialises as a client money shortfall. According to CASS 7.15.3R, if a firm’s internal client money reconciliation identifies a shortfall in its client money resource compared to its client money requirement, the firm must pay its own money into a client money account to cover the shortfall. This must be done by the close of business on the day the reconciliation is performed. This rule is a cornerstone of client money protection in the UK, ensuring that any deficits, regardless of their cause (in this case, an operational failure), are immediately rectified by the firm to ensure client money is fully segregated and protected at all times. Reporting the breach to the FCA (CASS 7.15.33R) is also required, but the primary and most immediate action is to fund the shortfall. Investigating the cause is crucial but secondary to making the clients whole. Using surpluses to offset shortfalls is strictly prohibited as it would involve using one client’s money for the benefit of another.

This question assesses a critical principle within the FCA’s CASS 6 (Custody Rules) regarding the treatment of client assets upon a firm’s insolvency. In the UK, under the CISI exam syllabus, a key objective of the CASS regime is to ensure that client assets are segregated and protected from the firm’s creditors. When a shortfall occurs in a pooled omnibus account (where assets of multiple clients are held together), the available assets in that pool must be distributed amongst the entitled clients on a ‘pro-rata’ or ‘rateable’ basis. This means each client receives a share of the available assets proportional to their original entitlement. This ensures a fair and equitable distribution of the loss among all affected clients. Methods like ‘first-in, first-out’ or prioritising certain clients over others are explicitly not permitted as they would unfairly prejudice some clients. The insolvency practitioner is bound by these CASS rules to follow the rateable distribution methodology.

Under the UK’s Financial Conduct Authority (FCA) Client Assets Sourcebook (CASS), specifically CASS 7 (Client Money Rules), firms holding client money must ensure it is adequately protected. When a firm holds money for multiple clients in a pooled account, known as a General Client Bank Account (GCBA), the money is automatically protected by a ‘statutory trust’. This trust arises by operation of law under CASS 7.13.2R and does not require a separate, explicit trust deed to be created between the firm and each client. The effect of this statutory trust is that, in the event of the firm’s insolvency, the client money held in the GCBA is segregated from the firm’s own assets and does not form part of the estate available to general creditors. Instead, it is available to be distributed to the clients on a pro-rata basis. This contrasts with a ‘non-statutory trust’, which is an alternative arrangement where a firm explicitly creates a trust over client money by executing a trust deed, a method less commonly used by investment firms.

This question assesses the candidate’s understanding of counterparty risk, a critical area within the FCA’s Client Assets Sourcebook (CASS). Under CASS 7 (Client Money Rules), a firm is required to exercise all due skill, care, and diligence in the selection, appointment, and periodic review of any credit institution where it deposits client money (CASS 7.11.64R). The primary objective of the CASS rules is the protection of client money and assets in the event of a firm’s or a third party’s insolvency. In this scenario, the financial distress of the credit institution represents a significant counterparty risk. This is the risk that the third party holding the client money will fail, potentially leading to a delay in the return of funds or an ultimate loss for the clients if there is a shortfall in the client money pool. While the firm faces regulatory risk for inadequate due diligence and potential operational challenges, the most direct and severe impact on the clients is the potential loss of their segregated funds held by the failing counterparty.

This question tests knowledge of the FCA’s Client Assets Sourcebook (CASS), specifically CASS 7.11.2 R, which is a core component of the CISI Client Money and Assets exam syllabus. This rule dictates the timing for the segregation of client money. The rule states that a firm, upon receiving client money, must promptly pay it into a client bank account. The absolute deadline for this action is no later than the next business day following the day of receipt. In the scenario, the cheque is received on Friday. Therefore, the next business day is Monday. The firm’s internal policy of processing funds received after 3:00 PM the next morning is compliant, as long as the ultimate regulatory deadline of the close of business on the next business day (Monday) is met. The other options are incorrect because ‘immediately’ is not the specified deadline (though promptness is required), the same day is not mandated, and a two-day period exceeds the permitted timeframe.

This question assesses understanding of the core principles of asset protection under the FCA’s CASS 6 (Custody Rules). According to CASS 6.3, when a firm deposits safe custody assets with a third party, it must take steps to ensure the assets are legally segregated from the firm’s own assets. A critical control, as specified in the CISI syllabus and FCA rules, is obtaining a written acknowledgement letter from the third-party custodian. This letter must confirm that the assets are held for the firm’s clients and that the custodian waives any right of lien, set-off, or retention against them for any debts owed by the investment firm. The primary risk of failing to obtain this letter is that, upon the firm’s insolvency, the assets held by the custodian could be claimed by the firm’s creditors or the liquidator as belonging to the firm, leading to significant client losses. The other options are incorrect because the scenario states internal records are accurate (ruling out reconciliation issues), CASS 7 applies to client money not assets, and while operational delays are a concern, the fundamental risk of total loss in insolvency is the primary regulatory focus of this specific control.

This question assesses understanding of the role of the compliance function within the ‘three lines of defence’ model, a core concept in financial services governance and a key area for the CISI Client Money and Assets exam. The Financial Conduct Authority’s (FCA) CASS sourcebook, particularly CASS 10A (CASS operational oversight function), and the Senior Management Arrangements, Systems and Controls (SYSC) sourcebook, place significant emphasis on a firm’s control environment. The correct answer reflects that the compliance function acts as the ‘second line of defence’. Its primary role is not to perform the operational tasks of the ‘first line’ (the business/operations team) but to provide oversight, advice, and challenge. When a breach is identified, compliance must advise the business and senior management on the regulatory requirements and implications (as per SYSC 6.1), and then monitor and oversee the implementation of corrective actions to ensure the firm returns to a compliant state. This includes ensuring the breach is properly documented, assessed for materiality, and reported to the FCA if required. Taking over the task directly, focusing solely on discipline, or reporting externally without a proper internal assessment are all incorrect as they misrepresent the primary advisory and oversight role of compliance.

This question tests the candidate’s knowledge of the FCA’s Client Money rules, specifically CASS 7.13.3 R, which governs the timing for segregating client money. According to this rule, a firm must pay any client money it receives into a client bank account promptly. The rule provides a final deadline, stating that this must be done, in any event, no later than the next business day after the money is received. In the scenario, the firm receives a mixed remittance (containing both client money and the firm’s own money) on Tuesday. Therefore, the firm has until the close of business on the next business day, which is Wednesday, to segregate the £95,000 of client money into a designated client money account. Failing to do so would constitute a breach of CASS 7. This is a fundamental principle tested in the CISI Client Money and Assets exam.

This question assesses understanding of the FCA’s CASS 6 (Custody Rules) regarding internal controls, specifically the reconciliation and resolution process. The correct answer is that an inadequate process for timely investigation and resolution is the most likely failure. According to CASS 6.6.5R, a firm must investigate the cause of any discrepancy revealed by a reconciliation and take prompt action to resolve it. The metric showing a consistent increase in unresolved breaks lasting more than five business days directly points to a failure in this specific control. While the other options represent potential CASS failings, they are not the most direct cause indicated by the scenario. The reconciliation frequency (monthly) can be compliant under CASS 6.6.2R depending on the firm’s activities. A failure in initial segregation (CASS 6.2) or insufficient record detail (CASS 6.5) would cause the breaks, but the key issue highlighted by the performance metric is the failure to resolve them in a timely manner, which is a separate and critical control step.

This question tests knowledge of the specific requirements under the FCA’s CASS 6 (Custody Rules) when a firm deposits a retail client’s safe custody assets with a third party in a jurisdiction outside the United Kingdom. According to CASS 6.3.4AR, if the local law and market practices in that third country do not provide the same level of protection for the assets as is provided in the UK, the firm faces a heightened obligation. The rule explicitly states that the firm must not deposit the assets in that jurisdiction unless the retail client has given their express prior consent in writing (or equivalent). Crucially, this consent must be informed, meaning the firm must first disclose to the client the specific risks and consequences of the assets being held in that particular jurisdiction. While conducting due diligence on the custodian is a general requirement (CASS 6.3.1R), the specific, overriding requirement for this high-risk scenario is obtaining the client’s informed, express consent. Notifying the FCA for approval is not a requirement, and while ensuring proper registration is important, it does not supersede the need for the client to explicitly accept the jurisdictional risk.