Watchdog warns investment companies

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The Independent Online

The chief City watchdog yesterday warned that it is planning a crackdown on companies that hold clients' money after finding a string of serious failings.

The Financial Services Authority has sent a letter to the chief executives of several major insurance brokers and investment companies with a report on the failings together with demands for improvements.

It follows a letter in March 2009 which called on firms to do more to protect clients' money and assets.

The watchdog said that failings included: poor management oversight and control, a lack of establishment of trust status for segregated accounts, unclear arrangements for the segregation and diversification of clients' money; and incomplete or inaccurate records on accounts.

The FSA has already taken measures against a number of the firms that it visited, including referring two to enforcement, freezing the assets of one of them and commissioning skilled persons reports.

Sally Dewar, managing director of risk, said: "The client asset rules are a key protection for consumers. It is simply unacceptable that firms are not ensuring that consumers get the appropriate protection. We have pointed out our concerns to firms and will be following up these concerns with further visits this year."

The FSA has warned all financial companies that they face a crackdown this year. Last year saw a record level of fines imposed, with this year expected to be even worse.On Wednesday insurer Standard Life became the first major financial company to be hit. It has been told to pay £2.45m in fines after misleading investors about how risky one of its funds was.

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