views

Two firms hit with FSA fines for client flops

City A.M. Reporter
CITY watchdog the Financial Services Authority (FSA) has fined the retail arm of stockbroker Astaire Securities and an asset management unit of Close Brothers a total £609,000 for failing to protect client money.

Under FSA rules, companies have to ringfence client money and keep it in segregated accounts with trust status to protect it in the event of insolvency. In a stark warning to institutions last week, the regulator fined US investment bank JP Morgan a record £33.3m for failing to protect billions of dollars of client money over almost seven years.

The FSA said yesterday it had fined retail stockbroker Rowan Dartington, part of Astaire, after the unit failed to test and implement a new software system.

The firm had also put client cash at risk over more than two years to September 2009 by failing to separate money for business including spread bets and options.

Rowan Dartington was unable to account for £1.4m of its own assets at the time of the FSA probe and has since written off more than £1m of this amount.

“The breaches took place over a long period and the risks they posed were compounded by the fact that this was a period of market turmoil,” said Margaret Cole, head of the FSA’s enforcement and financial crime division.

Close Investments Limited was separately fined £98,000 for failing to hold client money in appropriate segregated accounts between 2008 and January 2010 and for failing to maintain adequate controls.

The regulator said it had now established a unit to boost its ability to monitor firms’ treatment of client money with specialist supervision, data analysis and risk management.

It said both Close and Rowan Dartington cooperated with the investigation and settled at an early stage.