On 14 January 2014, HM Treasury published the “Final review of the Investment Bank Special Administration Regulations 2011” conducted by Peter Bloxham. The report meets Parliament’s requirement that the Treasury hold an independent review of the special administration regime (SAR) for investment banks within two years of it coming into force. Continue reading
On 26 November 2013, the FCA published a final notice and accompanying press release levying a fine of GBP 900,200 on the asset manager SEI Investments (Europe) Limited (SEI) for failing to arrange adequate protection of client money in the period from 1 November 2007 to 4 October 2012. Continue reading
On 3 September 2013, the Financial Conduct Authority (FCA) published a press release announcing the final notice it has issued to Aberdeen Asset Managers Limited and Aberdeen Fund Management Limited (“Aberdeen”), fining the firm £7,192,500 for breaches of the FCA’s client money rules. This fine included a 30% discount for early settlement by Aberdeen.
Over a three year period from 31 August 2008 to 31 August 2011, Aberdeen breached Principle 3 (management and control) and Principle 10 (protection of client assets) of the FCA’s Principles for Businesses. The firm failed to recognise that money held on behalf of clients in Money Market Deposits (MMDs) with third party banks were subject to the FCA’s client money requirements set out in Chapter 7 of the Client Assets Sourcebook (CASS). As a result, Aberdeen breached rules 7.3.1R, 7.3.2R, 7.6.1R, 7.6.2R and 7.8.1R in CASS.
Under the client money requirements, firms are required to protect money held on behalf of its clients in the event of firm failure. Aberdeen failed to:
- Provide appropriate trust letter notifications to the banks and did not obtain acknowledgements confirming the client money trust status of the deposited monies from those banks;
- Provide consistent account naming conventions when setting up accounts, creating uncertainty over ownership of those accounts.
The net result was that an average daily balance of approximately £685 million had been at risk but no actual loss of client money was suffered. However had the firm become insolvent, severe delays and complications in the distribution of client money would have resulted.
Aberdeen’s failings highlight the importance of identifying and protecting client money. In this regard, a CASS Resolution Pack (CASS RP) represents a useful and readily available compliance tool. In providing a convenient snap shot of the state of a firm’s CASS compliance, not only does it assist an Insolvency Practitioner in locating and returning client money, but it also highlights immediate and ongoing deficiencies in a firm’s CASS procedures. Implementing prompt remedial action with respect to CASS deficiencies highlighted during the creation and maintenance of a CASS RP will help avoid the high price, both in terms of monetary fines and reputational damage, that was experienced by Aberdeen in this case.
On 26 April 2013, the FCA published Policy Development Update No 157. This summarises the anticipated publications dates for various pieces of regulatory guidance. Of note are the following:
- a policy statement (PS12/5) to CP11/16 on recovery and resolution plans, due for publication in Q2 2013;
- a policy statement to part 2 of CP12/22 on the client assets regime (multiple client money pools), due for publication in Q2 2013 (had previously been noted as “TBD”); and
- a policy statement to CP12/20 on client money rules for insurance intermediaries, due for publication in Q3/Q4 2013.
Just a reminder that I am giving a webinar on CASS Resolution Packs for Insurance Intermediaries tomorrow at 3:30 pm. The event is free and you can register here.
On 16 April 2013 I am a guest speaker in a webinar being given by the Forum for Regulatory Change. The presentation will focus on the future requirements for insurance intermediaries to prepare and maintain CASS Resolution Packs. It will summarise the law in this area as it applies to insurance intermediaries and will leverage off the practical experience we have derived from implementing CASS Resolution Packs for banks and investment firms.
The event is free and you can register here.
On 25 February 2013, the FSA published Policy Development Update Number 156 detailing forthcoming publications from the FSA on a wide range of issues, including:
- RRP: Policy Statement to CP11/16 and PS12/5 on recovery and resolution planning. This is expected to be published in Q2 2013; and
- CASS RP: Policy Statement to CP 12/20, “Review of the client money rules for insurance intermediaries”. This will include finalised rules regarding CASS Resolution Packs for firms subject to CASS 5 and is expected to be published in Q3/Q4 2013.