The FSA has fined investment manager Rowan Dartington & Co £511,000 for failing adequately to protect and segregate client money for more than two years.
In a series of breaches between May 2007 and September 2009, the regulator found Rowan Dartington put its clients' money at risk by failing to segregate customers' money for contingent liability business, including spread bets and options.
The investment firm put in place a new software system in May 2007 but failed to properly test and implement it. 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.
At the time of the FSA's investigation, Rowan Dartington was also unableto demonstrate the recoverability of up to £1.4m of its own net assets in its accounting records because of the failures.
The firm also neglected to ensure it had the correct trust letters from its banks and counterparties, the FSa found.
No clients have suffered actual financial loss as a result of these issues, the FSA says.
Today's penalty follows last week's record £33.3m fine from the regulator for the same type of breach against investment bank J.P. Morgan.
The FSA is now set to refer the bank's auditors PricewaterhouseCoopers (PwC) to its regulators after the firm failed over a seven-year period to spot J.P.Morgan had accidentally placed as much as £16bn of client funds into the wrong bank accounts.
Under the FSA's client money rules, firms are required to keep client money separate from the firm's money in segregated accounts with trust status. This protects client money in the event of the firm's insolvency.
FSA director of the enforcement and financial crime division Margaret Cole says:: "Rowan Dartington & Co Ltd committed a serious breach of our client money rules by failing to protect its clients' money.
"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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