FSA fines Leopold for lax controls

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An undisclosed but material loss on a client's foreign exchange deals has earned an £85,000 fine for Leopold Joseph & Sons, the licensed deposit-taker that was bought by Bermuda's Bank of Butterfield in February. It may result in the Joseph name disappearing.

An undisclosed but material loss on a client's foreign exchange deals has earned an £85,000 fine for Leopold Joseph & Sons, the licensed deposit-taker that was bought by Bermuda's Bank of Butterfield in February. It may result in the Joseph name disappearing.

The fine was imposed by the Financial Services Authority for "serious failings in its system for monitoring adherence to credit limits". Failure to maintain controls agreed with the FSA was highlighted by what was described as a "material loss on a discretionary foreign exchange dealing arrangement for a client". Members of the Rolling Stones are believed to be Joseph clients, but the company refused to say whether they were involved in the loss.

Between May 2001 and July 2002, the credit limit for foreign exchange transactions for the client's discretionary trading account was exceeded a number of times, the FSA said, on occasions, by more than five times the limit. In July 2002, the client incurred a material foreign exchange trading loss, of which neither the client, nor Joseph's senior management, was aware. The credit excesses were unauthorised and the loss was borne by the client.

Andrew Procter, the FSA's director of enforcement, said: "The failure to introduce an effective control on the monitoring of adherence to credit limits increased the possibility of Joseph being exposed to... unacceptable credit risk. This has the potential to reduce the ability of regulated firms to repay depositors, thereby threatening both market confidence and the interests of consumers."

Paul Turtle, the managing director of Bank of Butterfield, said: "Controls are now in place and we need to move forward." He added that the bank was considering whether to drop the Joseph name.

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