FCA has fined Charles Schwab UK Ltd nearly £9m for failing adequately to protect client assets, carrying out a regulated activity without permission and making a false statement to FCA .
FCA found the firm changed its business model and, following the change, it swept client assets belonging to retail clients over to a US affiliate. The assets were held in the US affiliate’s general pool, with firm and client money held for UK and non-UK clients. FCA found the firm:
- did not have the right records and accounts to identify its customers’ client assets;
- did not undertake internal or external reconciliations for those assets;
- did not have adequate organisational arrangements to safeguard assets; and
- did not meek a resolution pack.
Also, it did not at all relevant times have permission to safeguard and administer custody assets, and did not tell FCA it had been acting in breach when it did apply for the right permission. It also inaccurately told FCA its auditors had confirmed its systems and controls were adequate, having not made adequate enquiries to check.
When the firm discovered the breaches, it took various remedial actions, and stopped holding client assets from January 2020.
FCA said there was no actual loss of client assets but imposed the large fine (discounted by 30%) for breaches of Principles 10 and 11, breaches of CASS and breach of s20 FSMA.