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Stockbroker breaks FSA rules on client money

The FSA has fined stockbroker Rowan Dartington & Co £511,000 for failing to protect and segregate client money for more than two years.

Under FSA rules, firms are required to keep client money separate from the firm’s money in accounts with trust status.

The regulator says Rowan Dartington put a new software system in place in May 2007 but failed to properly test and implement it, which led to a breakdown in the company’s reconciliation processes.

The FSA says the resulting problems meant the firm could not rely on the accuracy of its internal books and records and so could not be confident it was segregating the right amount of its clients’ money.

It also contributed to Rowan Dartington being unable to demonstrate the recoverability of up to £3;1.4m of its own net assets in its accounting records.

In a series of breaches between May 2007 and September 2009, Rowan Dartington also placed client money at risk by failing to segregate it for contingent liability business, including spread bets and options.

The firm also failed to properly ensure it had the correct trust letters from its banks and counterparties.

Rowan Dartington co-operated with the FSA during the investigation and agreed to settle the matter at an early stage, qualifying for a 30 per cent discount.

FSA director of the enforcement and financial crime division Margaret Cole says: “The breaches took place over a long period and the risks they posed were compounded by the fact that this was a period of market turmoil.”

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