The FCA has fined stockbrokers Charles Schwab UK (CSUK) £8.96m for failing to “adequately protect client assets, carrying out a regulated activity without permission and making a false statement to the FCA”.
According to the authority, the breaches occurred between August 2017 and April 2019, after CSUK changed its business model. Reports suggest that client money was “swept across” from CSUK to its affiliate Charles Schwab & Co., Inc. (CS&C), a firm based in the United States.
The client assets, which were subject to UK rules, were held in CS&C’s general pool, which contained both firm and client money and which was held for both UK and non-UK clients.
It is also reported that the CSUK made a false statement to the FCA, with the firm inaccurately informing the FCA that its auditors had “confirmed that it had adequate systems and controls in place to protect client assets”.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Charles Schwab UK failed to get the correct permissions from the FCA; then failed to be open with us and, finally, failed to put in place the necessary safeguards to ensure, if required, there could be an orderly return of client assets.
“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.”
He added: “‘Firms, including newly-established businesses or firms coming into the UK from overseas, are responsible for ensuring they comply with our rules, and are expected to make sure they have the right protections in place.”