FCA Brings First Case Under New Penalty Regime

By David Shirt

The Financial Conduct Authority’s (FCA) decision to fine Xcap Securities PLC in the first client asset case since the body introduced its new penalty regime has demonstrated the need for FCA regulated firms to ensure they thoroughly investigate any regulatory breaches, according to a legal expert.

Retail investment and capital markets business was fined £120,900 for failing to adequately protect client money and client assets, as result of work under taken when the company began trading between June 29th 2010 and August 31st 2011.

Through the period, the company’s breaches included failing to properly segregate client money from its own, failing in terms of its record keeping and accounts of client money and assets, and not carrying out accurate client money reconciliations.

According to the FCA, this meant that there was a risk clients may have faced difficulties or delays in recovering their assets if Xcap became insolvent.

Irwin Mitchell’s specialist Regulatory and Criminal Investigation Group has vast expertise in representing organisations and individuals in relation to regulatory matters including those handled by the FCA.

Commenting on this case, Sarah Wallace, Partner in the Regulatory and Criminal Investigation Group at the national law firm, said: “Even if the client money or ‘CASS’ breach is not deliberate and no clients suffer any losses as a result of the error, firms which discover such breaches have to investigate the issue thoroughly through an internal review and consider their reporting obligations to the FCA. 

“As well as facing the prospect of FCA censure and sanctions, a non-compliant firm has to ensure they have robust systems and controls going forward, while senior management should oversee client money obligations.”

If a firm or individual is concerned they are affected by any issue in this article then please contact Sarah Wallace on sarah.wallace@irwinmitchell.com or 020 7421 3876.