As a member of the APCC, UKGI participates in a number of their sector / topic-specific working groups, one of which is the general insurance working group. At a meeting of the GI working group this week, an issue was raised in relation to HSBC Bank and letters that have been sent to insurance brokers in relation to their client money accounts.
We understand that HSBC has written to some insurance brokers questioning the title of the client account and that, as part of the communication, HSBC advised the brokers concerned that their client account was being converted to operate on a ‘current account’ type basis. This means that the protections / provisions of no right of set-off against the account and no application of fees or charges to the account were removed. This is contrary to the requirements in CASS 5 in relation to the operation of client trust accounts.
The firms concerned, with the assistance of their compliance consultancy, wrote to HSBC to challenge this and to set out what the position needs to be (effectively re-issuing to HSBC the client trust account letter requesting that certain requirements are confirmed). We understand that in both cases HSBC accepted that they were in the wrong and the issue was resolved with the re-instatement of the ‘trust’ status of the accounts.
This information is provided for general awareness, but also in case any firms are affected by this issue. If you hold a client money account of any kind with HSBC and they write to you along the lines of the issues set out above, please contact us for assistance. This also applies to any broker operating a client trust account with any Bank where you are experiencing issues or difficulties with them in relation to client trust accounts.