Britain’s financial watchdog has fined U.S.-listed Charles Schwab’s UK business 8.96 million pounds ($11.88 million) for failing to protect client assets, likening it to missteps taken by Lehman Brothers before the 2008 financial crisis.
The Financial Conduct Authority (FCA) said bit.ly/2WxaXN4 the penalty was for Charles Schwab UK Ltd (CSUK) carrying out a regulated activity without permission and making a false statement to the watchdog.
It added that the breaches, which occurred between August 2017 and April 2019, affected retail customers.
“As we saw with Lehman Brothers and subsequent cases, a lack of client asset protections can easily lead to increased costs to consumers and funds being trapped for long periods of time,” said Mark Steward, executive director of Enforcement and Market Oversight at the FCA.
A spokesperson for the company acknowledged that the matter was settled with the FCA, adding that client money and assets were protected at all times in accordance with U.S. rules.
“Although no clients or assets were negatively impacted, we regret the errors and are pleased this matter has been resolved,” CSUK said.
The regulator said CSUK neither had the right records and accounts to identify its customers’ client assets, nor did it have adequate organisational arrangements to safeguard them.
The FCA said the company did not have permission to safeguard and administer custody assets at all times, and failed to mention the breach when applying for the correct permission.
The firm falsely informed the FCA that its auditors had confirmed it had adequate systems and controls in place to protect client assets, the watchdog said, adding there was no actual loss of client assets.
CSUK agreed to settle the case and qualified for a 30% discount, without which the penalty would have been 12.8 million pounds, the FCA added.
($1 = 0.7541 pounds)