Chatting on bridge

CASS pain for BarCap

26 January 2011

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.