The FSA has fined Barclays Capital £1.12m for failing to protect and segregate, on an intra-day basis, client money held in sterling money market deposits.
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. This helps to safeguard and ring-fence the client money in the event of the firm’s insolvency.
For over eight years, between December 1, 2001 and December 29, 2009, Barclays Capital failed to segregate client money maturing from its sterling money market deposits on an intra-day basis.
Such client monies were segregated overnight but matured into a proprietary bank account and were mixed on a daily basis with Barclays Capital’s own funds, typically for between five and seven hours within each trading day.
The average daily amount of client money which was not segregated increased from £6m in 2002 to £387m in 2009.
The highest amount held in the account and at risk at any one time was £752m.
Had the firm become insolvent within the five to seven hours each day in which the funds were unsegregated, this client money would have been at risk of loss.
The FSA says the misconduct was not deliberate and Barclays Capital rectified the situation on discovery. It adds no clients suffered losses as a consequence of the segregation error.
The regulator says Barclays Capital did not profit from, or avoid losses, as a result of the breach, nor was there any incorrect financial reporting by Barclays Capital in the period December 2001 to December 2009.
The firm co-operated with the FSA in the course of its investigation and agreed to settle at an early stage. In doing so, it qualified for a 30 per cent discount. Without the settlement discount the fine would have been £1.61m.
FSA managing director of enforcement and financial crime Margaret Cole says: “Barclays Capital committed a serious breach of FSA client money rules by failing to segregate millions of pounds of its clients’ money for over eight years. This posed a significant risk and the penalty reflects the amount of client money involved in this breach.”