Aberdeen fined £7.2m for failing to protect clients
The Financial Conduct Authority (FCA) has fined Aberdeen Asset Managers and Aberdeen Fund Management almost £7.2 million for "failing to identify, and therefore properly protect, client money" placed in money market deposits (MMDs) with third party banks.
Aberdeen failed to comply with FCA client money rules designed to ensure that if a firm fails, money held on behalf of its clients is clearly identified, protected and returned as soon as possible.
This, the FCA said, left Aberdeen's clients at risk of delays in having their money returned if Aberdeen became insolvent.
It added that had debts been owed by Aberdeen to the third party banks providing the MMDs client money could also have been at risk.
The asset manager also failed to obtain the correct documentation from third party banks when setting up the affected accounts between September 2008 and August 2011. The FCA found it had used inconsistent naming conventions when setting up the accounts, which created uncertainty over who owned the funds.
The City regulator pointed out that Aberdeen had been asked to ensure it obtained the correct documentation by the FCA's predecessor, the Financial Services Authority, following a review in May 2009. Soon after in 2010, Aberdeen confirmed to the FSA it was fully complying with the rules.
Tracey McDermott, director of enforcement and financial crime at the FCA, said: "Proper handling of client money is essential in ensuring that markets function effectively. Where they fall short of our standards, firms should expect the FCA to step in and take action to avoid a poor outcome for their clients, and ultimately, consumers."
In admitting its failings and settling the case quickly, Aberdeen qualified for a 30% discount to the fine, which would otherwise have been more than £10.2 million.
In a statement, Aberdeen Asset Management said: "Aberdeen Asset Management PLC confirms that it has today agreed to a fine of £7.2 million from the Financial Conduct Authority in full and final settlement of past inadvertent breaches of UK client money rules which Aberdeen identified and reported to the regulator.
"No clients suffered any loss as a result of the breaches and at no point were client funds mixed with the Aberdeen's own money. Nor was there any risk of any client money being lost as a result of set-off, as Aberdeen did not have any borrowings with any of the relevant banks, although there was a risk that 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."
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.