City firms fined for failing to protect clients

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The Independent Online

Two more City firms have been fined by the Financial Services Authority for failing to properly ring-fence clients' money, after the regulator last week handed a record £33m penalty to JP Morgan for the same offence.

Stockbroker Rowan Dartington and fund manager Close Investors were respectively fined £511,000 and £98,000 yesterday for failing to ensure that clients' money was segregated from their own assets. The failings meant that had either company become insolvent, customers might not have been able to get their money back.

"Rowan Dartington committed a serious breach of our client money rules by failing to protect 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," said Margaret Cole, the FSA's director of enforcement and financial crime.

"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."

Both companies co-operated with the FSA's inquiries and, as a result, paid lower fines than they might have faced otherwise. In neither case did clients actually lose money.

Nevertheless, the FSA has focused increasingly heavily on the protection of clients' money since the financial crisis and warned last week – following the JP Morgan fine – that several more actions were pending.