Release Date: 13th July 2016
To access the original FCA document, click here.
Summary
The Financial Conduct Authority (FCA) has fined Towergate Underwriting Group Limited (TUGL) £2,632,000 for significant failings in handling client and insurer money between 29 June 2005 and 31 December 2013. The investigation revealed a shortfall of £12.6 million in TUGL’s accounts due to inadequate systems and control weaknesses. TUGL’s failure to properly segregate and reconcile client and insurer money, along with other breaches of the Client Assets Sourcebook (CASS) rules, placed client and insurer funds at risk.
Summary of Reasons:
- Key Failings: TUGL failed to organise and control its affairs responsibly and effectively, as required by Principles 3 (Management and Control) and 10 (Clients’ Assets). Specific failures included:
- Inadequate segregation of client money from company funds.
- Inaccurate client money calculations and reconciliations.
- Delayed correction of client money shortfalls.
- Failure to notify the FCA of its inability to perform required client money calculations.
- Improper handling of interest accrued on client money accounts.
- Inaccurate maintenance of records corresponding to actual client money held.
- Impact: Although there was no actual loss of client or insurer money, TUGL’s failings could have led to significant risks and complications, especially if the firm had become insolvent. The FCA emphasised the importance of protecting client money and maintaining robust control systems to avoid such risks.
Key Takeaways for Other Firms:
- Ensure Robust Systems: Implement and maintain effective risk management systems to ensure accurate segregation and reconciliation of client and insurer money.
- Promptly Address Shortfalls: Immediately correct any identified shortfalls in client money accounts and notify the FCA as required.
- Regular Reviews: Conduct regular internal audits and compliance checks to ensure adherence to CASS rules and other regulatory requirements.
- Proper Training: Provide adequate training to staff handling client and insurer money to ensure they understand and follow regulatory requirements.
- Cooperate with Regulators: Cooperate with regulatory investigations and take proactive steps to rectify identified issues.
Conclusion:
The FCA’s action against TUGL underscores the critical importance of adhering to client money regulations and maintaining robust internal controls. Firms must prioritise the protection of client assets to ensure compliance with regulatory standards and avoid significant penalties
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