'Our implementation proposals do not mean significant changes to CASS as MIFID II is broadly aligned. We therefore think firm impact will be small' – FCA, MIFID II Implementation – Consultation paper II CP16/19.

Will the impact of changes to the CASS rules be small for every firm? With so much else to consider as part of MiFID II implementation, investment firms could be forgiven for overlooking proposed changes to CASS arrangements. But some of these may have a considerable impact on specific businesses. Here, Deloitte's CASS advisory specialists highlight some potential challenges in meeting key aspects of the new rules. So what to focus on?

Title Transfer Collateral Arrangements

The proposed changes to the use of Title Transfer Collateral Arrangements (TTCAs) could have a major impact for some firms, and require careful consideration.

The appropriateness of using TTCAs will need to be considered for each client, and their use is now prohibited for retail clients. However, there is currently no guidance about how frequently appropriateness must be considered. Specific factors must be taken into account, such as the amount of a client's obligation, which can change daily.

The commentary in CP16/19 is clear that firms should consider preventing 'automatic, blanket use of TTCAs for all clients, without considering their liabilities.' Many firms are currently using TTCAs this way and will need to rethink their approach.

Above all else, firms will need a clear policy on what 'appropriateness' looks like to them, and set up the monitoring needed to evaluate TTCAs.

Use of Money Market Funds for client money

With interest rates low, more firms are likely to be considering using qualifying money market funds (MMFs) for clients' money. The new rules require careful due diligence and consideration of diversification before using MMFs.  Firms will need to ensure that clients give explicit consent to the placement of their money in a MMF – something that could further restrict their use.


The new rules make a firm responsible if a third party of a third party (sub-custodians and similar) fails to meet the deposit requirements for custody assets – this becomes a reportable breach.

Extra work could be needed to monitor third parties, and existing agreements may need to be updated.

CASS oversight

Most firms should have already considered the responsibility for CASS operational oversight. However, the new rules go further in clarifying the FCA's expectations of a CF10a.

A CF10a must have sufficient skill and authority, and firms must allocate this responsibility to a single director or senior manager (or more under a job-share arrangement). Guidance is explicit that the FCA 'would normally expect a firm not to allocate any additional responsibilities...' to the allocated person unless appropriate to do so at 'a small and non-complex firm'.

Policy documents and role descriptions may need to be updated to reflect the new rules.


Article 5(4) of the MiFID II implementing directive requires firms to take collateral and monitor its continuing appropriateness when arranging securities lending. In most instances this may already be happening. However, firms that facilitate stock-lending (or allow third party firms to use client assets) will need to consider how to demonstrate compliance with the new rules (as well as keeping a close eye on the implementation of the Securities Finance Transactions Regulation), for example establishing a clear process to value collateral against stock-lending obligations.

Liens/secured interests

MiFID II now follows the UK approach in prohibiting the use of general liens over client assets. Firms will need to demonstrate that all arrangements have been reviewed.

Where general liens are in place, firms will need to consider whether it is possible to demonstrate a legal requirement for the lien. Obtaining legal assurance in third country jurisdictions can be expensive and time-consuming.

Summary and next steps

It is unlikely that there will be significant changes to the final rules before these come into effect in 2018; so firms can already begin to consider how to demonstrate compliance with the new CASS rules. The key will be to establish clear policies and processes for the appropriate use of collateral, with good assurance these work, and to schedule compliance checks on all documents.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.