Many firms hold money that belongs to someone else: solicitors, fund administrators, corporate service providers and platforms among them. That money has to be held so that it remains identifiable and returnable if the firm fails. The disciplines that achieve this are safeguarding and segregation.
The principle
Client money must be kept apart from the firm’s own money. If the firm fails, clients’ money can then be identified and returned without being caught up with the firm’s creditors. Every other requirement follows from this.
What it requires
- Segregation: client money held in designated client accounts, apart from the firm’s own money
- Reconciliation: regular, documented checks that the records match what is held at the bank
- Records: knowing whose money sits where at any given moment
- Governance: clear responsibility, controls and an audit trail over every movement
For regulated firms these are obligations. Regulators and auditors expect evidence: reconciliations performed and signed off, breaches identified and reported, and a trail an auditor can follow from start to finish.
Why it matters beyond compliance
Firms that take safeguarding seriously tend to find it improves how they run. Knowing whose money sits where, and being able to prove it, gives better control of the business and a cleaner audit.
It also shapes what a firm can do with client money. Spreading balances across banks for more protection, or earning a competitive return on idle balances, has to happen inside the segregation and reconciliation framework.
Meeting the standard without building everything
Meeting the standard takes account structures, reconciliation, reporting and controls, and the people to run them. That is why solicitors and corporate service providers increasingly run client money on infrastructure built for the purpose. The duty stays with the firm. The segregation, reconciliation and audit-ready reporting are done to standard on the platform.