Wealth Manager - the site for professional investment managers

Register for full access to Citywire’s Fund Manager database, news and analysis. Registration is free and only takes a minute.

FSA fines BlackRock Investment Management £9.5m

1 comment
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.

BlackRock added: 'These steps include establishing a dedicated client money team, led by a managing director responsible for oversight of our client money obligations. 

'As the FSA itself noted, the situation that led to this settlement was not deliberate and no clients suffered any losses as a result of the error.  Still, we regret this instance where our UK procedures regarding money market deposits for a number of our clients were not consistent with applicable standards, and we are pleased to have fully resolved this matter with the FSA and that the matter is now closed.'

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Investment Pulse: the highs and lows of 2014

Investment Pulse: the highs and lows of 2014

This week's Investment Pulse looks back at some of the biggest stories of the year as well as looking forward to 2015.

Play Inside ETFs: Why the US bull-run still has legs

Inside ETFs: Why the US bull-run still has legs

Global equities suffered a sharp sell-off in the third quarter but exchange traded fund investors are continuing to back the US to outperform in 2015

Play Paul Niven: I won't rip up the Foreign & Colonial Trust history book

Paul Niven: I won't rip up the Foreign & Colonial Trust history book

The newly appointed manager of the Foreign & Colonial trust talks about his plans for UK's oldest investment company.

Your Business: Cover Star Club

Manchester wealth firm hires Coutts director for London launch

Manchester wealth firm hires Coutts director for London launch

Former Coutts director Tony Robinson has joined Chartered Wealth Management to head the company’s newly opened London office.

Wealth Manager on Twitter