The Financial Services Authority (FSA) has fined Integrated Financial Arrangements, the parent company of wrap provider Transact, £3.5 million for failing to properly protect client money.
Transact, which offers independent financial advisers (IFAs) a tax-efficient way to hold their clients’ money, held £508 million between December 2001 and June 2010.
Under FSA regulation, firms are required to keep client money separate in bank accounts with trust status. They should also perform daily checks to confirm the amounts correspond with their records.
After inspecting Transact in May 2010, the FSA found the firm had not performed the necessary checks, meaning client money was at risk if Integrated Financial became insolvent.
Tracey McDermott, acting director of enforcement and financial crime at the FSA, commented, ‘Integrated Financial has committed a serious breach by failing to comply with our client money rules for a significant period of time.
‘The FSA has repeatedly emphasised the importance of ensuring that client money is adequately protected and in the past year has taken enforcement action against firms of all sizes for breaches of its client money rules.’
She added that firms can expect more regulatory attention in the future.
Integrated Financial agreed to settle at an early stage and so has qualified for a 30 per cent discount on the original fine of £5 million. The regulatory body confirmed that no clients lost any money.
Last month the FSA fined investment firm McInroy & Wood £15,000 for failing to properly protect client money.
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