FSA fines DFM £15k for client money breaches
The FSA has fined a discretionary investment management firm £15,050 for breaching client money rules.
Under the FSA’s client money rules, firms are required to keep client money separate from the firm’s money in segregated accounts with trust status.
A firm must have a trust letter from the bank holding its client money to ensure that, in the event of the firm’s insolvency, client money is clearly identifiable and is ring-fenced from the firm’s own assets so that it can be promptly returned.
East Lothian based firm McInroy & Wood Limited failed to obtain a trust letter for 22 segregated offshore retail client bank accounts, which contained an average balance of £666,000.
MWL missed several opportunities to review its client money arrangements in relation to these 22 offshore accounts meaning the error went undetected by the firm between May 2006 and August 2010.
FSA head of the client assets unit Richard Sutcliffe says: “MWL’s failure to check whether it had a trust letter in place for these 22 accounts exposed its clients to risk in the event of insolvency.
“There is no substitute for a trust letter as it confirms client money is ring-fenced from the firm’s own assets, readily identifiable and aids the prompt return to clients.
“The FSA has repeatedly emphasised the importance of ensuring that client money is adequately protected and firms of all sizes must ensure client money is segregated and that this is acknowledged with a trust letter in accordance with FSA rules.”
MWL did not enter into insolvency, promptly rectified the failing and no clients suffered any losses as a consequence of the breach.