Client-money segregation — policy language vs account reality

Safeguarding policies often sound complete: client assets are segregated, firm money is separate, and reconciliations run daily. Diligence and audit fieldwork then ask a narrower question — do the account titles, mandates, and bank confirmations match those sentences?

We have seen well-intentioned teams keep firm float in a named client account “for convenience,” or leave a dormant product corridor on a shared mandate after the product sunset. Neither issue appears in a policy PDF. Both appear when a custodian confirmation arrives.

A practical check before any client-asset safeguarding audit:

• Pull every bank and custodian account that can hold client value
• Match each to a mandate and to a product still live
• Confirm the ledger that owns the balance is the one operations reconciles
• Document any omnibus arrangements and how beneficial ownership is tracked

When language and accounts diverge, fix the weaker of the two — usually the account structure — before examination season. Rewording a policy alone rarely satisfies an auditor who has already seen the confirmation letter.