Charles Schwab fine reminds firms of client asset pitfalls

An £8,963,200 penalty meted out by the Financial Conduct Authority should prompt firms that are part of a larger corporate group to review the final notice carefully as well as ensure their legal entity specific records, custody accounts at third party depositaries, reconciliations and resolution packs are in order, says Denis O’Connor.

Denis O’Connoris a fellow of both the Institute of Chartered Accountants in England & Wales and the Chartered Institute of Securities and Investment. He was a member of the British Bankers’ Association Money Laundering Committee from 2003-10 and a member of the Joint Money Laundering Steering Group’s board and editorial panel between 2010 and 2016. He has been a frequent speaker at industry conferences on financial crime issues, both in the United Kingdom and abroad.

The FCA recently fined Charles Schwab UK Limited (CSUK) £8.96 million for failing adequately to protect client assets, for carrying out a regulated activity without permission and for making a false statement to the FCA. [1] The breaches occurred between August 2017 and April 2019 after CSUK had changed its business model. Client money had been transferred from CSUK to a United States entity, Charles Schwab & Co, Inc (CS&C), which held it in the firm’s general pool alongside funds from non-United Kingdom clients in contravention of the FCA’s Client Assets Rules.