Release Date: 15th April 2015
To access the original FCA document, click here.
Summary
Who was fined:
- The Bank of New York Mellon London Branch (BNYMLB) and The Bank of New York Mellon International Limited (BNYMIL).
Why the FCA fined them:
- The FCA fined BNYMLB and BNYMIL £126 million for failing to comply with the Client Assets Sourcebook (Custody Rules, or CASS) from 1 November 2007 to 12 August 2013.
- The Custody Rules are designed to protect client assets in the event of a firm’s insolvency, ensuring assets can be returned to clients promptly.
- The Firms failed to maintain entity-specific records and accounts, conducted inadequate reconciliations, and lacked sufficient CASS-specific governance.
- They also failed to prevent the commingling of client assets with firm assets and improperly used safe custody assets without clients’ express prior consent.
Key Takeaways for Other Firms:
- Adherence to Custody Rules: Ensure strict compliance with the FCA’s Custody Rules to protect client assets and maintain proper records.
- Entity-Specific Records: Maintain accurate and entity-specific records and accounts to facilitate the return of client assets in case of insolvency.
- Regular Reconciliation: Conduct regular and thorough external reconciliations of client assets to comply with regulatory requirements.
- Governance Arrangements: Implement robust CASS-specific governance arrangements tailored to the nature and scale of the business.
- Client Consent: Obtain explicit prior consent from clients before using their assets to settle other transactions.
- Compliance Monitoring: Regularly review and update compliance procedures to identify and remedy any failings promptly.
By adhering to these principles, firms can ensure the protection of client assets and avoid significant regulatory penalties.
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