SEI Investments

Release Date: 25th November 2013

To access the original FCA document, click here.

Summary

The Financial Conduct Authority (FCA) has imposed a financial penalty of £900,200 on SEI Investments (Europe) Limited (SEI) for significant breaches related to client money protections. Without the early settlement discount, the penalty would have been £1,286,000. These violations occurred over a nearly five-year period from November 2007 to October 2012.

SEI failed in several key areas concerning the handling of client money, which was in breach of Principle 10 and various rules within the Client Assets Sourcebook (CASS). Specifically, SEI was found to have:

1. Not performed required internal client money reconciliations regularly.
2. Failed to address shortfalls or excesses in client money on the day they were identified.
3. Used a non-standard method for these reconciliations without obtaining necessary auditor approval or notifying the FCA.
4. Submitted inaccurate Client Money and Assets Returns (CMAR).
5. Lacked adequate training for employees handling client money responsibilities.

These shortcomings meant that in the event of SEI’s insolvency, clients could have faced significant delays and difficulties in recovering their funds, exposing them to potential financial loss. The average daily balance of client money during the relevant period was around £84.3 million, underscoring the scale of the risk posed by SEI’s failures.

The FCA’s enforcement action against SEI underscores the importance of robust internal controls and compliance with client money protection regulations. The financial penalty reflects the serious nature of the breaches and serves as a reminder to all financial services firms of the need to maintain stringent standards in client asset management to protect consumer interests and uphold market integrity.

SEI’s failings were identified not through its internal processes but through external audits and a report by a skilled person, highlighting the need for firms to have effective internal monitoring and compliance mechanisms. Post-identification, SEI took steps to rectify the issues by investing in external consultants and restructuring its operational model to align with regulatory expectations.

This case acts as a crucial lesson for other firms to ensure they adequately protect client assets, especially during periods of significant business growth, and maintain transparent and compliant operational practices.

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