Regulator warning for brokers on client cash

28 January 2010 | By Nicole Blackmore

The FSA has written to the chief executives of major insurance brokers and investment firms highlighting its concerns over the handling of client money.

The letter is accompanied by a report which includes examples of how firms should meet FSA expectations in relation to compliance.

The regulator warns it will be increasing its visits to firms this year to assess how well its requirements are being met.

This follows a letter sent to firms in March 2009 which explained the obligations that a firm has to protect clients’ money and assets and set out the FSA’s intention to conduct further firm visits during 2009.

The FSA visited a range of firms and found poor management oversight and control, a lack of establishment of trust status for segregated accounts, unclear arrangements for the segregation and diversification of clients’ money and incomplete or inaccurate records, accounts and reconciliations.

It has already taken measures against a number of the firms it visited, including referring two firms to enforcement, freezing a firm’s assets and commissioning skilled person’s reports.

Managing director of risk Sally Dewar says: “The client asset rules are a key protection for consumers. It is simply unacceptable that firms are not ensuring that consumers get the appropriate protection. We have pointed out our concerns to firms and will be following up these concerns with further visits this year.”

City law firm CMS Cameron McKenna partner Paul Edmondson says: “There is a storm brewing over the protection of client money and assets. The Lehman Brothers’ fail- ure has exposed many issues, both about the rules themselves and the level of compliance. Firms can expect new rules and an increasing spotlight from the regulator with more skilled person’s and enforcement action.”

If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing