Client Money & Assets Return (CMAR) Reporting

The collapse of Lehman Brothers (2008) and the subsequent international financial crisis prompted the Financial Conduct Authority (FCA) to enforce a mechanism to protect clients' money and assets, especially during insolvency. Hence, the FCA created the Client Assets Sourcebook (CASS) and mandated CASS firms to submit a Client Money and Assets Return (CMAR) report monthly. While the requirement of CMAR reporting is essential for maintaining trust and transparency, many CASS firms face significant operational challenges in compliance and meeting these obligations. If you work in a CASS firm, you're probably familiar with one or more of these challenges:

• You don't know how to build a tailored CMAR module to be CASS compliant.
• Manual reconciliation process wastes time, causes data entry errors, and leaves no audit trail.
• You are missing CMAR submission deadlines and risk FCA penalties.
• Your reconciliation process is fragmented, causing a lack of visibility among teams and inconsistencies in your records.

Keep reading to learn more about how CMAR reporting works and how to comply with the CMAR reporting requirements.

What is Client Money and Assets Return (CMAR)

Client Money and Assets Return (CMAR) is a monitoring tool that helps the FCA to regularly oversee CASS firms' client money and assets positions. The goal is to proactively ensure that clients' finances in CASS firms are safe and can be returned promptly in cases of insolvency or bankruptcy.

Understanding the FCA's Client Money and Asset Return (CMAR)

In 2024, 23,872 registered UK companies became insolvent. Without establishing processes to distinguish and protect clients' funds, insolvent CASS firms might fail to return clients' money and assets. To mitigate risks, the FCA mandates medium and large CASS firms to submit an accurate CMAR report within 15 business days after each month ends. This ongoing monitoring enables the FCA to hold CASS firms and their executives accountable for client money and assets management practices.

Why CMAR reporting matters for regulated firms?

The FCA created CMAR as a regulatory instrument to prevent a repeat of the 2008 financial crisis - an outcome which everyone views as important to avoid. Among other reasons, CMAR reporting is important for regulated firms in particular because it:

• Protects clients' finances: By ensuring that firms segregate their funds and other clients' funds from individual client money and assets, client funds will be safe during insolvency.
• Lets the FCA monitor CASS firms: CMAR reports provide information on the current state of client finances, allowing early detection of inconsistencies before they escalate and disrupt the market.
• Helps CASS firms stay CASS compliant: It helps firms to avoid heavy FCA fines, reputational damage, and operational disruptions.

Who needs to submit a CMAR?

Businesses classified as medium and large CASS firms under the Client Assets Sourcebook (CASS) rules must submit a CMAR. This classification depends on the amount of clients' money and assets that a firm holds. Each year, the FCA mandates CASS firms to fill a categorisation questionnaire, which determines the value of client assets held by firms and what category they fall into.

Firms that fall under the CMAR obligation

Only large and medium CASS firms fall under the CMAR obligation. According to the FCA, CASS firms are grouped into three main categories:

• Large CASS firms: Financial institutions that exceeded thresholds of £1 billion in client money or £100 billion in custody assets at any point during the previous calendar year.
• Medium CASS firms: Financial institutions whose highest holdings ranged between £1 million and £1 billion in client money or between £10 million and £100 billion in safe custody assets during the last calendar year.
• Small CASS firms: Financial institutions holding less than £1 million in client money or less than £10 million in safe custody assets during the last calendar year.

Large and medium CASS firms must send a monthly CMAR report and have a designated director or senior manager who will oversee the firm's CASS compliance. Small CASS firms are not obligated to complete a monthly CMAR report.

CMAR Reporting Guidelines

Maintaining CASS compliance is challenging, but these demands are minimal compared to the consequences of non-compliance. Follow the FCA's guidelines - some of which are laid out below - to strengthen your position, remain compliant, and avoid regulatory scrutiny.

Be the first to hear about new posts from Vasco Rodrigues

Subscribe to our newsletter for updates straight to your inbox.

Submit↵

By submitting this form, I confirm that I have read and understood Aurum's Privacy Policy

FCA Requirements

Here are some of the FCA's CMAR requirements:

• Large and medium firms must submit a complete CMAR report to the FCA within 15 business days after the end of the month.
• Firms are required to keep an up-to-date record and maintain it for five years.
• The FCA doesn't prescribe any particular methodology or frequency for valuing safe custody assets for the CMAR report.
• All CMAR figures must be reported in GBP (sterling). Money or assets in other currencies are converted using the previous day's closing spot exchange rate.
• CMAR reports must be submitted electronically using the FCA's system (GABRIEL).

Key Components of the CMAR Form

The FCA collects and tracks relevant client finance data regularly using a CMAR form. Some of the key components of the CMAR form include:

• number of acknowledgement letters
• reconciliation breaks
• value of client assets
• value of client money
• outsourcing arrangements
• highs and lows during the period
• auditors
• number of clients
• notifiable breaches during the period

Frequency and Reporting Timeline

The FCA requires large and medium CASS firms to submit a complete CMAR report within 15 business days after the end of each calendar month. CASS firms must also be mindful of following other regulatory timelines though. For instance, they must conduct daily internal client money reconciliation (ICMR). These internal reconciliations should cover the firm's records at the close of business on the previous business day. The firms must also calculate the total client money held for each client within two business days of deciding to check clients' money balances or receiving a request from the FCA.

CMAR Reporting Deadline

CMAR reporting involves complex data collection from different sources and in various formats, often leading to missed deadlines. To prevent this, CASS firms can automate data entry, data integration, matching, spotting exceptions and reporting by using reconciliation software like Aurum which automates the entire end-to-end process.

How Late Submissions Are Treated by the FCA

FCA penalties escalate as the delay's duration increases. Submission delays under 28 days attract financial sanctions. Repeat delayed submissions that are perceived as being deliberate or reckless receive higher penalties. Submissions exceeding 28 business days, with no exceptional circumstances justifying the delay, attract higher financial penalties, with other disciplinary actions on the approved persons responsible for reporting.

Note: The FCA may treat a report as not received if it is materially incomplete or inaccurate or submitted through non-compliant methods.

The Relationship Between CMAR and CASS

CASS functions like the safety manual of a complex machinery, while CMAR is the logbook that operators keep to show compliance with the stipulated safety standards.

What Is CASS and Why Does It Matter?

Client Assets Source (CASS) is a regulatory body that governs how firms manage customers' money and assets. It mandates firms to separate clients' funds and protect their assets during insolvency. This prevents CASS firms from prioritising profits over safeguarding clients' assets and boosts clients' confidence in the financial system. It instils a culture of accountability and responsible profitability in firms that handle client finances.