The Financial Conduct Authority has fined a stockbroking and asset management firm £120,900 for failing to protect client money and client assets.
Xcap Securities, a retail investment and capital markets business, is the first firm to be fined over client money failures under a new penalty regime brought in by the FCA.
The new penalty regime for client money rule breaches uses a percentage of average client money and client safe custody asset balances as part of a five step process to decide the level of fines.
In Xcap’s case, the fine is based on 2 per cent of its average client money balance plus 0.2 per cent of its average client asset balance over the period of the breaches.
Between 29 June 2010 and 31 August 2011, Xcap failed to properly segregate client money from its own, failed to keep accurate records and accounts of client money and client assets, and did not carry out accurate client money reconciliations.
The failures risked clients facing difficulty or delay in recovering their money if Xcap were to become insolvent.
FCA director of enforcement and financial crime Tracey McDermott says: “This is the first case the FCA has brought for breaches of the client assets rules using our new penalty regime. The new levels of penalty are expected to result in larger fines, demonstrating the seriousness with which we view these failures and serving as a stronger deterrent to firms.
“We have been very clear about our expectations of firms that have responsibility for investors’ money and safe custody assets. Xcap failed to meet the required standards from the very outset of its business and continued to have widespread failures for a number of months.”