For firms safeguarding client assets, CASS 6 defines how custody assets must be held, segregated, and reconciled so clients can recover what they own quickly if a firm fails. Effective compliance demands more than trust structures and record-keeping. It requires demonstrable control, clear oversight, and daily reconciliation supported by strong governance.

Understanding CASS 6

CASS 6 governs how regulated firms hold and protect custody assets – financial instruments such as shares, bonds, and funds that belong to clients, but are held by the firm or its agents. The rules are designed to protect investors if a firm becomes insolvent or if errors occur in record-keeping or settlement. 

At its core, CASS 6 aims to ensure that:

• Client assets are always held separately from the firm’s own assets.

• Accurate records and reconciliations are maintained daily.

• Custody relationships with third-party custodians are properly managed.

• Firms can produce clear evidence of ownership, holdings, and locations.

• Oversight and governance demonstrate control from the top down.

The underlying principle is simple: firms must know exactly what client assets they hold, where they are held, and on whose behalf.

The FCA’s expectations

Supervision has intensified, with the FCA highlighting weaknesses in records, reconciliation, and governance. Firms must maintain accurate internal data, verify positions daily, investigate discrepancies, and keep complete audit trails.

The FCA’s message is consistent: compliance must be demonstrable, not declarative. Firms need to show evidence that controls operate as intended, that discrepancies are resolved promptly, and that senior management understands the firm’s custody and segregation model in detail.

Key components of CASS 6 compliance

• Segregation of Client Assets

Segregation is the cornerstone of CASS 6. Firms must ensure that client assets are always held in separate accounts and that those accounts are clearly labelled as belonging to clients, not the firm.

• Accurate Record-Keeping

Under CASS, firms must maintain records and accounts that enable them to identify each client’s assets at any time. These records should reconcile precisely with external confirmations from custodians and settlement systems.

• Frequent Reconciliation

Firms are required to perform daily reconciliations between internal records and external registers. This ensures that the firm’s view of client assets matches the actual holdings at custodians. When discrepancies are identified, they must be investigated promptly, documented, and resolved. 

• Third-Party Custody Oversight

CASS requires firms to perform ongoing due diligence on all third-party custodians. Firms must assess the custodian’s financial stability, operational resilience, and segregation arrangements, and ensure that service agreements include explicit CASS protections.

• Governance and Accountability

Good governance is what turns CASS 6 from a procedural checklist into a functioning control system. Firms must appoint a CASS Oversight Officer, ensure senior management oversight, and establish reporting lines that escalate issues quickly.

Common challenges

Firms often struggle with fragmented data, manual reconciliation, slow exception management, limited visibility, and resource pressure. Aged breaks and unresolved discrepancies frequently stem from manual processes.

Addressing these challenges requires not just better processes but smarter tools that bring clarity and automation to CASS control environments.

Best practice

• Map your custody model – document all client asset flows, accounts, and third-party relationships.

• Centralise records – maintain a single source of truth for all client asset data, updated daily.

• Automate reconciliation – use technology to match records, flag discrepancies, and reduce manual effort.

• Formalise oversight – define roles, responsibilities, and escalation procedures within governance frameworks.

• Enhance due diligence – review custodians regularly and ensure contractual terms align with CASS standards.

• Train and embed accountability – ensure all staff understand their part in safeguarding client assets.

• Leverage data analytics – monitor trends, exception rates, and performance indicators to drive improvement.

These steps help firms move beyond compliance and build a custody framework that is both resilient and transparent.

How technology supports effective custody compliance.

Technology now plays a central role in helping firms meet CASS 6 obligations by enabling continuous monitoring and consistent evidence of control performance. Automation removes manual effort from reconciliation, speeds up the detection of discrepancies, and unifies data into a single view. This reduces operational risk and provides near real-time visibility across all accounts. Automated workflows can then assign ownership, track actions, and create audit trails so exceptions are resolved quickly and with full transparency.

Governance also improves through clearer accountability, attestation workflows, and dashboards that give boards and compliance leaders an immediate view of CASS 6 metrics. The result is a more resilient and well-governed custody environment supported by real-time, data-driven oversight.

Bringing confidence to custody compliance

At Grath, we help regulated firms simplify and strengthen their approach to CASS 6 compliance. Our platform integrates reconciliation, exception management, and governance into one connected, intelligent compliance platform.

If your firm is ready to modernise its custody framework, contact Grath today to see how our technology can help you master CASS with confidence.