The FSA has fined Close Investments Limited £98,000 for failing to properly protect and segregate client money.
The regulator says between January 2008 and January 2010, CIL failed to hold client money in segregated accounts with trust status.
The firm also failed to implement and maintain adequate controls over its client money, as required by FSA rules.
In particular, for two years, CIL failed to verify that certain accounts had been appropriately set up as client money accounts. These accounts related to a number of unregulated collective investment schemes managed by CIL. The firm was responsible for ensuring all periodic distributions were paid directly to investors.
In January 2008, a new process was put in place by the administrator of the funds and the process for distributions was outsourced. To facilitate the new process, CIL arranged for distribution accounts to be opened in relation to each fund in order to pay distributions to investors.
These accounts should have been set up as segregated client money accounts with trust status but CIL failed to do this. It also failed to pick up that the accounts did not have the required trust status.
The FSA says CIL proactively notified the FSA after identifying the problem and cooperated with the FSA’s investigation. CIL agreed to settle at an early stage and the firm qualified for a 30 per cent discount.
FSA director of enforcement and financial crime division Margaret Cole says: “Customers should be able to assume authorised firms have the right systems and controls to safeguard their assets. CIL put clients at risk of significant financial loss by failing to segregate client money appropriately for a period of two years – this is unacceptable.”