The Financial Conduct Authority (FCA) has fined Aberdeen Asset Managers and Aberdeen Fund Management £7,192,500.
It handed out the penalty for failing to identify and therefore properly protect client money placed in Money Market Deposits (MMDs) with third party banks. The FCA said the failings took place between September 2008 and August 2011.
The average daily balance in MMDs affected by the failings was £685 million.
In a statement, the FCA said that Aberdeen had incorrectly determined the money was not subject to its rules, which meant it did not obtain the correct documentation from third party banks when it set up the accounts.
The FCA said Aberdeen also used inconsistent account naming, and this created additional uncertainty over who owned the funds.
FCA director of enforcement and financial crime Tracey McDermott said: 'Proper handling of client money is essential in ensuring markets function effectively.
'Where they fall short of our standards, firms should expect the FCA to step in and take action.'
Aberdeen, which is headed by Martin Gilbert (pictured), confirmed in a separate statement it had received a £7.2 million fine from the regulator and that the penalty was in full and final settlement for the failings identified by the FCA.
'No clients suffered any loss as a result of the breaches and at no point were client funds mixed with Aberdeen’s own money,' the firm said.
'Nor was there any risk of any client money being lost as a result of setoff, as Aberdeen did not have any borrowings with any of the relevant banks, although there was a risk clients could have potentially faced a delay in the return of their money in the highly unlikely event that Aberdeen became insolvent.
'We regret that the situation arose, have co-operated fully with the FCA in the course of its investigation and have amended our UK procedures regarding bank deposits following the FCA’s guidance.'