A view of the CF10a role

1. A view of the CF10a role Gareth Adams Senior Adviser

2. This section will cover…. • A Senior Advisor’s perspective on SIF • Where the FSA is coming from and why • How to really address the SIF regime

3. The fit and proper test • Honesty, integrity and reputation • Financial soundness • Competence and capability

4. From the Statements of Principle • Must take reasonable steps to ensure that the business of the firm for which he is responsible is organised so it can be controlled effectively • Exercise due skill, care and diligence • Must take reasonable steps to ensure that the business of the firm for which he is responsible…complies with the relevant requirements and standards of the regulatory system

5. Specific 10a responsibilities • Expertise and competence sufficient to maintain general oversight of compliance with CASS • Reporting to the governing body on CASS compliance • Submission of the client money asset return (CMAR)

6. The acid test • Any applicant will be checked against the responsibilities the role involves and the competencies it requires • For firms with large values of customer assets this will in all likelihood involve a significant influence function interview

7. The broad range of competencies • Market knowledge • Firm business strategy and model • Risk management and control • Financial analysis and control • Governance oversight and control • Regulatory framework and requirements

8. Expectation around competencies • The ability to understand what is happening in the business • The ability to analyse that in terms of risk to clients, the firm and its compliance • The ability to access information and people as needed for information and engagement • Having a view on the effectiveness of arrangements and the ability (or access to the ability) to change what falls short

9. Market knowledge • The nature of the interface between the firm and the market infrastructure and participants • How assets enter and leave the firm • What happens before and after in the transaction and processing chain • How other such firms organise their affairs

10. Firm business strategy and model • Nature of services and products • Nature of clients • Importance of availability of assets to business model (use as collateral, interest stream etc) • Future product and services developments to enable strategic input re CASS compliance

11. Risk management and control • The structure, systems, processes and people involved in the processing and safekeeping of client assets • The control environment in the business area, in oversight functions and in third line functions such as internal audit

12. Financial analysis and control • Information on size, make up and disposition of client assets and revenue streams there from • Trend and comparative data to analyse shifts in size, make up and disposition of client assets • Information on processing volumes, error rates and fails perhaps in the form of key indicators

13. Governance oversight and control • Development, implementation and oversight of CASS-related policies • Independence and effectiveness of relevant control functions • Internal reporting lines for concerns and state of play reporting • External reporting (CMAR) • Ability to gain a line of sight into delegated activities

14. Regulatory framework and requirements • What the rules are • What obligations they impose on the firm and on the CF10a • What is regarded as good practice by the regulator and the market • What the CF10a needs to do and be seen to be doing to discharge his obligation

15. Some final personal observations • An important front line role that is likely to develop over time • Demanding in terms of its competences and delivering on its obligations • Should only be offered or assumed on the right terms as regards authority, reporting lines, access and resources