The United Kingdom’s Financial Conduct Authority (FCA) ) announced today that it has imposed £8.96 million fine on the UK subsidiary of the American multinational broker, Charles Schwab. The regulator fined Charles Schwab UK for the company’s failure to protect client assets.
According to the official press release, the broker carried out a regulated activity without the authorization of the FCA. Additionally, Charles Schwab UK made a false statement to the regulator. All the affected clients were the retail customers of the broker.
The FCA outlined that Charles Schwab UK failed to receive relevant permissions from the regulatory authority and the mentioned breaches occurred between August 2017 and April 2019, when the broker changed its business model.
“Client Money was swept across from CSUK to its affiliate Charles Schwab & Co., Inc. (CS&C), a firm based in the United States. The client assets, which were subject to UK rules, were held in CS&C’s general pool, which contained both firm and client money and which was held for both UK and non-UK clients,” the FCA mentioned in the official press release.
Client Protection
Moreover, the authority mentioned the importance of protection of client assets and stated that Charles Schwab UK has failed to keep the right records to protect the assets of its clients. The FCA gave the example of Lehman Brothers and said that the absence of a client asset protection framework in an organization is destructive for a financial firm.
“CSUK carried out a regulated activity without permission. The firm did not at all times have permission to safeguard and administer custody assets, and failed to notify the FCA of the breach when applying for the correct permission. CSUK made a false statement to the FCA. Without making adequate inquiries to check whether this was correct, the firm inaccurately informed the FCA that its auditors had confirmed that it had adequate systems and controls in place to protect client assets,” the regulatory authority mentioned in a statement.
