FCA Handbook Notice 142, which was released in June 2026, confirms the final handbook changes made following its consultation paper CP25/37. This introduces targeted CASS 6 and 7 rule changes, which come into force on 25 September 2026.

It’s important to clarify that the changes announced in this notice are not a rewrite of the CASS regime. They instead focus on practical areas that currently create undue administrative burden for firms (and the FCA), or inconsistency between auditors, while maintaining the underlying protection of client money and custody assets.

In summary, the changes cover:

• Due diligence record retention

• Record sources for external custody reconciliations

• Statement frequency for external custody reconciliations

• Interest received into client bank accounts

• Consumer Duty and the CASS audit

A breakdown of the changes

The clarifications in the Handbook Notice are targeted rule changes to specific CASS provisions. The practical impact of each area is set out below.

Due diligence record retention

The FCA has clarified that the five-year retention period for due diligence records runs from when a record is created or last amended, rather than from the end of the relationship with the third party. This aims to reduce the need to keep historic due diligence files for extended periods where a firm continues to use the same bank, custodian, or counterparty.

External custody reconciliations

From September the rules will be broadened to allow firms, if applicable, to use Euroclear UK and International’s (EUI’s) Investment Fund Service (IFS) System Record for external custody reconciliations, subject to specified conditions.

Though not yet confirmed, extending a similar treatment to other market infrastructure records is a separate question that the FCA may consider in future.

Statement frequency

The FCA recognises that custodians do not always provide statements as frequently as the rules require. The update gives firms limited flexibility so that in the situation of infrequent submissions, a breach does not arise purely from factors outside their control. The flexibility of this rule is narrow. Only in specific circumstances can a firm rely on an exemption from performing the external custody reconciliation, and where that exemption applies it will not be in breach of the requirement to reconcile at least monthly.

Interest received into client bank accounts

The FCA has clarified how interest received into client bank accounts (CBAs) should be treated. This is expected to help firms by confirming the treatment across different scenarios that arise in practice, including where interest is credited to a CBA automatically through the bank’s own processes. In doing so, it gives firms the opportunity to avoid breaches that would be caused by factors outside their control rather than by any failure in their own systems.

Consumer Duty and the CASS audit

The update to SUP 3.10 confirms that, although CASS and the Consumer Duty interact, assessing Consumer Duty compliance is not within the scope of the CASS audit. This should help give firms and auditors a clearer, more consistent boundary between the two.

Why do these changes matter?

In practice, the clarifications set out in the Notice mean firms will be able to direct more compliance effort to areas where it reduces real risk, rather than on low value administrative tasks. This should mean that firms also begin to see fewer technical and legacy findings in their audit.

We believe these changes to be welcome as they will help firms to remove disproportionate operational burden without compromising client protection. The opportunity is not simply to do less, but to concentrate on what genuinely protects client money and custody assets, and to step back from tasks that add cost rather than value. The changes should also reduce inconsistency between auditors, giving firms and their auditors a more consistent basis for assessing CASS compliance in the future.

Next steps

This article provides a high-level overview of the CASS-related changes in the Handbook Notice. The changes are due to come into place in September 2026 and the impact for each firm will depend on its permissions, products, client base, and operating model.

The practical step now is for firms to review the Notice released by the FCA to understand the changes and take a look at their current CASS 6 and 7 arrangements against the changes.

Buzzacott’s dedicated team of CASS specialists can help you understand how the CASS 6 and 7 changes apply to your business, and the potential impacts these may have on your CASS audit. If you have any questions about the changes, contact us using the form below.