Release Date: 31st May 2013
To access the original FCA document, click here.
Summary
Xcap Securities PLC was fined £120,900 by the Financial Conduct Authority (FCA) for failures in adhering to Principle 3 (Management and Control) and Principle 10 (Clients’ Assets) of the FCA’s Principles for Business, as well as violations of the Client Asset Sourcebook (CASS) rules. The period of non-compliance ranged from 29 June 2010 to 31 August 2011.
Xcap’s infractions included not segregating client money properly, failing to ensure that all safe custody assets were accurately identified as belonging to clients, not maintaining precise records and accounts of client money and assets, and inadequate organisational arrangements to manage risks associated with client money and assets. The firm also did not have proper trust documentation for some client money bank accounts, did not perform timely and accurate client money reconciliations, and failed to pay interest on client money or report non-compliance promptly.
These breaches meant that client money and safe custody assets were at risk of loss or delay in recovery if Xcap became insolvent during the period of non-compliance. The firm’s issues were highlighted by its auditors and a skilled person’s report rather than by its own compliance monitoring, which underlines the seriousness of its control failures.
The key takeaways for other firms to avoid similar sanctions include ensuring that:
- Client money is accurately and promptly segregated from firm money.
- All safe custody assets are correctly registered and identified as client owned.
- Accurate and comprehensive records and accounts for client money and assets are maintained.
- Adequate organisational arrangements, policies, and procedures are established to manage and mitigate risks associated with client money and assets.
- Any failures in compliance are reported to the FCA without delay.
The settlement amount reflects a 20% discount due to Xcap’s agreement to settle at an early stage of the FCA’s investigation. Without this discount, the penalty would have been £151,136. This case serves as a crucial reminder of the importance of rigorous internal controls and proactive compliance monitoring to safeguard client assets and comply with regulatory standards.
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