The FSA has fined foreign exchange broker ActivTrades Plc £85,750 for failing to adequately ring-fence client money from the firm’s money.
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.
Between April 14 2009 and September 2 2010, the amount of client money held by ActivTrades ranged between £3.4m and £23.6m and averaged £12.2m.
ActivTrades failed to ensure that this money was fully segregated, which put client money at risk should the firm become insolvent.
ActivTrades’ failures were discovered as part of an FSA thematic review into the management of client assets and money held by firms.
Based on the review’s initial findings, the FSA required ActivTrades to engage a skilled person to review its client money arrangements. The skilled person’s report highlighted that, on several occasions, client money was mixed with ActivTrades’ funds.
Between January 29 2010 and June 14 2010, client money totalling €800,000 was held in an account used for ActivTrades’ own funds, which meant that it was not adequately protected.
The skilled person’s report also identified a number of other serious failings including failure to perform client money calculations accurately and failure to pay interest on client money. ActivTrades was also unable to monitor and assess the adequacy of its client money arrangements due to weaknesses in information given to senior management.
FSA director of small firms Linda Woodall says: “It is essential for firms to adhere to our client money rules and our recent action in this area shows our continuing focus on the importance of managing and protecting client assets adequately.
“Ensuring the necessary client money safeguards are in place is a key element of consumer protection, and firms of all sizes must ensure that any client money they hold is properly segregated.”