Compound Growth Ltd 2016 -
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CLIENT MONEY
REGULATORY FINES
Why the Regulator Reviewed the Client Money Asset Regime:
A number of high profile insolvencies, such as that of MF Global UK Ltd and Lehman Brothers (Europe) highlighted there were significant weaknesses within the industry when it came to the treatment of client money and the custody and safeguarding of client assets.
As such, in July 2013, the regulator initiated a consultation paper (CP 13/5) to review the client asset regime for investment business.
At that time there had also been a number of other relevant and highly publicised enforcement actions against firms for CASS failures, and the review sought to achieve better results for clients whose assets are placed with a firm when it enters insolvency such as:
- Improving the speed of return of client assets
- Achieving a greater return of client assets to clients and
- Reducing the market impact of a firm’s insolvency.
At the end of the consultation period, the FCA released a new policy statement in June 2014 (PS 14/9) on the Review of the client assets regime for investment business that set out the final rules and guidance in relation to the Client Assets sourcebook.
The FCA’s Policy Statement affects all firms that are subject to the requirements of the Client Assets sourcebook due to conducting investment business and holding client money, custody assets, collateral and/or mandates in relation to that investment business.
The FCA informs that a firm’s processes and safety controls for segregation, record keeping and client asset risks will be strengthened by the rule changes implemented in their entirety on 1st June 2015. But, who breached the client money rules that led to such an extensive and detailed re-
Regulatory Fines for Client Money Breaches:
Fined in April 2015 for failing to comply with FCA Client Assets Sourcebook (CASS).
Fined in September 2014 for failing to properly protect £16.5 Billion of clients’ assets, The regulator found significant weaknesses in the systems and controls of the banks’ investment business banking division between 2007 and 2012.
Fined in September 2013 for failing to protect client money that had been placed in money market deposits with third party banks.
Fined in May 2010 for failing to segregate billions of dollars of client money held by JP Morgan Chase Bank between 2002 and 2009. Had they become insolvent at the time, this money could have been lost.
Fined in September 2012 for failing to protect client money adequately between 2006 and 2010.
Fined in January 2011 for failing to protected and segregate client money held in sterling money market deposits for over eight years.
Client Money Support & Compliance Assistance
Compound Growth can assist firms of all sizes to ensure they have the necessary procedures in place to remain compliant with the regulator’s rules pertaining to client money and client assets as set out in the CASS Sourcebook.
In particular we can support your firm in establishing suitable accounting systems as well as developing client money policies in line with industry best practice and the FCA’s guidance.
If you would like to discuss client money or client assets further, please feel free to contact us or email enquiries@compoundgrowth.co.uk.
