News Room
December 2011 - Crossbridge comments on £3.5m FSA fine for Integrated Financial Arrangements fine and collapse of MF Global
BackThe £3.5 million fine issued to Integrated Financial
Arrangements for breaches of the FSA's Client Asset and Money
(CASS) regulations sends a clear message to the industry that the
FSA is firmly committed to its agenda of ensuring firms' compliance
with CASS and will continue to take enforcement action against
non-compliant firms. In the case of Integrated Financial
Arrangements, no clients suffered any losses, however the firm's
failure to perform client money calculations and maintain valid
trust documentation for all of its client money accounts, resulted
in client money being put at risk for a significant period of
time.
The collapse of MF Global, only a matter of weeks before, provides
us with all too timely a reminder of the damage that can be caused
to clients in an insolvency, when firms have failed to fulfil their
regulatory obligations to protect clients' assets. With an
estimated $1.2 billion missing from client accounts and
investigations underway to determine if client funds were diverted
into the firm's own account, MF Global's failure to protect client
assets highlights exactly the risk that the CASS regulations are
designed to prevent from crystallising.
The quality of the protections afforded by the client assets regime
is relied upon greatly by the FSA, to protect clients and promote
market confidence. The regulator has emphasised repeatedly
that its CASS supervision will become more intensive and
intrusive. The direct cost of non-compliance is a clear
incentive - penalty fines, commissioning of enforced Skilled
Person's (S166) reports and undertaking of any required remediation
activities, but there are reputational considerations as
well. As the FSA's attention on identifying non-compliant
firms continues to increase, so in turn does the awareness of
clients as to the protections they should be afforded;
non-compliant firms may start to lose business, if their houses are
not in order.
The FSA's message is clear - this is a priority area of regulation;
their attention on CASS will continue to grow and so should that of
firms holding client assets. Crossbridge has worked this year
with firms strengthening their CASS governance, oversight and
controls and developing operating models that are sufficiently
flexible to adapt to changes in business and regulation.
Ensuring these are embedded next year will be a key area of
focus.
