The UK’s financial watchdog has fined investment firm Charles Schwab £9m for failing to adequately protect client assets and making a false statement to the regulator.
Schwab’s breaches occurred between August 2017 and April 2019 when it moved client money from the UK arm to a US business.
The Financial Conduct Authority (FCA) today said Charles Schwab UK “failed to arrange adequate protection for its clients’ assets under UK rules”. It fined the company – the British section of the major US investment firm – £8.96m.
“Charles Schwab UK failed to get the correct permissions from the FCA; then failed to be open with us and, finally, failed to put in place the necessary safeguards to ensure, if required, there could be an orderly return of client assets,” said Mark Steward, executive director of enforcement at the watchdog.
The FCA said Schwab did not have the right records to identify its customers’ client assets, among other issues. The assets were kept in the US company’s general pool, the FCA said.
It also did not always have FCA permission to safeguard and administer assets. Schwab also made a false statement to the FCA by saying adequate controls were in place to protect client assets.
The FCA’s decision noted that the firm took remedial action at various points after discovering the breaches. There was no actual loss of client assets and Charles Schwab UK stopped holding client assets from 1 January 2020.
A Charles Schwab UK spokesperson said the firm “fully cooperated with the FCA’s investigation, has addressed the issues identified, and agreed to a penalty of £8.96m”.
“Charles Schwab UK maintains the highest standards of service, governance, and security, and although no clients or assets were negatively impacted, we regret the errors and are pleased this matter has been resolved.”