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View the article online at http://citywire.co.uk/wealth-manager/article/a684882

FCA fines Xcap Securities for failing to protect client money

by Emma Dunkley on Jun 11, 2013 at 10:42

The Financial Conduct Authority has fined Xcap Securities £120,900 for failing to protect client money and assets.

The watchdog said this is the first client asset case it has brought under the new penalty regime, which applies to breaches committed from 6 March 2010, and introduces new penalty levels.

The fine represents 2% of Xcap's average client money, plus 0.2% of its average client asset balance over the period of breaches.

The FCA said the new percentage levels are applied based on the seriousness of the breaches and that, under the new approach, it is expected the cases involving breaches of client asset rules will incur 'increased penalties,' compared with the old regime.

Xcap's breaches include failing to properly segregate client money from its own, not maintaining accurate record and accounts and not carrying out accurate client money reconciliations.

Consequently, the risk is that had Xcap become insolvent, clients could have faced difficulties and delays in recovering their assets.

Tracey McDermott, director of enforcement and financial crime at the FCA, said: 'This is the first case that the FCA has brought for breaches of the Client Assets rules using our new penalty regime. 

'The new levels of penalty are expected to result in larger fines, demonstrating the seriousness with which we view these failures and serving as a stronger deterrent to firms.'    

She added: 'We have been very clear about our expectations of firms that have responsibility for investors’ money and safe custody assets.  Xcap failed to meet the required standards from the very outset of its business and continued to have widespread failures for a number of months.'


3 comments so far. Why not have your say?

Doug Sammons

Jun 11, 2013 at 12:08

Why were'n't they shut down?

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Becx

Jun 11, 2013 at 13:03

Doug: If you read the full FCA notice you will see that, whilst XCap were most definitely in breach of CASS rules, they identified them themselves and then sought a route to full compliance, albeit with seemingly flawed advice from a compliance consultancy. The wording of the article categorises XCap with other recent CASS failures, but the circumstances are far removed from the usual rogues who frequent CW's pages.

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Keith Cobby

Jun 11, 2013 at 16:18

I agree with Doug, fining no longer works as a suitable sanction.

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