Integrated Financial Arrangements, the firm behind Transact, has been fined £3.5m for failings in the protection of client money.
A final notice, issued by the FSA today states the wrap did not perform daily client money calculations to check amounts in client bank accounts matched the firm’s records. As a consequence it failed to identify or fund any shortfalls in its client money bank accounts that may have occurred from buying and selling instructions occurring at different times.
This meant that money belonging to one client was used to cross fund other clients and resulted in clients’ money being at risk if Integrated Financial became insolvent. The firm should have funded any possible shortfalls from its corporate account.
The second breach relates to a failure to have adequate trust documentation in place for three of its 28 client bank accounts also putting client money at risk in the event of insolvency.
The failure was noticed as part of an FSA visit to IFA in May 2010 when it was noticed the firm had failed to carry out the calculations between 1 December 2001 and 30 June 2010. The amount of money held during that period averaged £508m. The FSA fine is calculated as a percentage of this £508m average.
The fine would have been £5m but it agreed to settle at an early stage, entitling it to a 30 per cent discount.
No Transact clients have lost money as a result of the breaches, but the FSA has made the firm appoint a skilled person to review its client asset processes.
The FSA notice says: “Integrated Financial did not perform any client money calculations between 2001 and 2010 and as a consequence failed to identify or fund any shortfalls in its client money bank accounts. This meant that money belonging to one client was used to cross fund other clients and resulted in clients’ money being at risk if Integrated Financial became insolvent.”
FSA acting director of enforcement and financial crime Tracey McDermott says: “We will continue to take steps to rectify procedures at firms that have fallen short of our client asset requirements and action will be taken against non-compliant firms.”
Integrated Financial Arrangements chief executive Ian Taylor says: ‘The essential point to make is that no client has suffered any detriment or loss as a result of the breaches. Nevertheless we are chastened. Achieving the highest standards in regulatory compliance is of central importance to our business, we will work tirelessly to reassure our clients, shareholders, staff and business partners that the problem is in the past and we are now fully compliant.”