CASS pain for BarCap
The FSA has fined Barclays Capital for client money breaches.
The focus is on BarCap's lack of segregation and therefore the insolvency risk created. The '1% rule' has been applied again in setting the level of fine. The Final Notice states: "In this type of case, the FSA considers an appropriate approach is to calculate the financial penalty by reference to a number of factors, including the amount of client money held. The penalty (before Stage 1 discount) is equivalent to 1% of the average daily amount of unsegregated client money held by Barclays Capital over the Relevant Period". The average daily amount of unsegregated money was about £160m, with the money 'at risk' ranging from £6m to over £700m.
This confirms that the rush of five CASS-related Final Notices in early June 2010 was not an isolated publicity stunt. The FSA clearly remains focussed on CASS compliance. In its December 2010 speeches, the FSA said:
"We have taken enforcement action against 11 firms and eight individuals, and imposed over £34m in fines, which amount to a significant proportion of total FSA fines issued this year; referred five firms to our Enforcement Division for investigation while further referrals are being actively considered; issued two private warnings to firms; and required 28 firms to commission s166 Skilled Person Reports (which are not all completed yet)".
This means we can expect more CASS-related fines and continued regulatory pressure on firms holding client assets or money.