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View the article online at http://citywire.co.uk/wealth-manager/article/a617260

FSA fines BlackRock Investment Management £9.5m

by Sarah Miloudi on Sep 11, 2012 at 10:39

FSA fines BlackRock Investment Management £9.5m

The Financial Services Authority (FSA) has fined BlackRock Investment Management (UK) £9.5 million for failing to protect client money.

Between 1 October 2006 and 31 March 2010, BlackRock Investment Management (BIM) did not adequately protect client money by failing to put trust letters in place for certain money market deposits, and for failing to take reasonable care by organising and controlling its affairs responsibly, the regulator said.

Issuing the fine, the FSA said that BIM did not obtain letters in relation to some of the money market deposits it placed with third party banks.

The error occurred as a result of systems changes that followed on from BlackRock group's acquisition of BIM, which had previously been known as Merrill Lynch Investment Managers.

'Identifying and protecting client money should be at the top of every firm’s agenda. We have repeatedly emphasised to firms that their systems and controls for ensuring this is the case must be robust and well designed and updated as circumstances change.

'Despite being part of one of the largest asset managers in the world, BIM’s systems were simply not adequate, and the basic step of notifying banks that the money was held on trust for clients was not done,' said Tracey McDermott, the FSA's director of enforcement and financial crime.

The FSA said that these changes rendered BIM's procedures for setting up trust letters ineffective.

'The average daily balance affected by this failure was over £1.36 billion.  Had the firm become insolvent at any time during this period, clients would have suffered delay in securing the return of their funds and may not have recovered their money in full,' the FSA added.

BlackRock said that rather than the issue being identified by regulator, the company itself came across it during an internal review and immediately reported it to the FSA,

'At BlackRock, our fiduciary commitment to our clients is at the heart of our business.  That is why when we identified this issue through an internal review and reported it to the FSA, we took steps to ensure we have what the FSA now describes as robust systems and controls relating to client money protection.

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1 comment so far. Why not have your say?

Dave Knight

Sep 11, 2012 at 11:26

So you find a problem, correct the situation, no-one loses any money, report it to the FSA and write out a cheque for £9.5m.

Makes you wonder why more companies don't just update their systems and then conveniently "forget" it was ever needed.

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