The FSA has fined Close Investments Ltd £98,000 for failing to properly protect and segregate client money.
The company, a subsidiary of Close Asset Management, put clients at risk of significant financial loss by failing to segregate client money appropriately for a period of two years, the regulator says.
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 helps to protect client money in the event of the firm's insolvency.
According to the FSA, between January 2008 and January 2010, Close failed to hold client money in segregated accounts with trust status.
It also failed to implement and maintain adequate controls over its client money as required by FSA rules. In particular, for two years CIL failed to verify that certain accounts had been appropriately set up as client money accounts.
These accounts related to a number of unregulated collective investment schemes managed by Close. The company was responsible for ensuring all periodic distributions were paid directly to investors.
In January 2008, a new process was put in place by the administrator of the funds and the process for distributions was outsourced. To facilitate the new process CIL arranged for distribution accounts to be opened in relation to each fund in order to pay distributions to investors.
These accounts should have been set up as segregated client money accounts with trust status but CIL failed to do this. It also failed to pick up that the accounts did not have the required trust status.
Margaret Cole, FSA director of enforcement and financial crime division, says: "Close Investments put clients at risk of significant financial loss by failing to segregate client money appropriately for a period of two years - this is simply unacceptable.
"It is essential for firms to adhere to our client money rules and recent action in this area shows that our focus has intensified. Firms should be in no doubt that if they fail to get their house in order in this regard we will take action against them."
Caring for children and elderly relatives
Similar to June 2007
Square Mile’s series of informal interviews
Fine reduced to £60,000
Two roles created