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.