XCAP fined for client money breaches
WILMSLOW stockbroker XCAP Securities has been fined £120,900 for failing to adequately protect the money and assets of clients.
It is the first client asset case brought by the Financial Conduct Authority (FCA) – one of the successor agencies to the Financial Services Authority (FSA) – under a new penalty regime, which applies to breaches committed after March 6, 2010.
It said XCAP breached two FCA rules which cover internal management and control, and the protection of clients’ assets.
The breaches, between June 2010 and August 2011, included failing to properly segregate client money from its own, failing to maintain accurate records and accounts of client money and client assets, and not carrying out accurate client money reconciliations.
The FCA said this created the risk that, had XCAP become insolvent, its clients could have faced difficulties and delay in recovering their money and assets.
The fine represents 2% of XCAP’s average client money balance plus 0.2% of its average client asset balance over the period of the breaches.
Tracey McDermott, director of enforcement and financial crime at the FCA, said: “This is the first case that the FCA has brought for breaches of the client asset rules using our new penalty regime. The new levels of penalty are expected to result in larger fines, demonstrating the seriousness with which we view these failures and serving as a stronger deterrent to firms.
“We have been very clear about our expectations of firms that have responsibility for investors’ money and safe custody assets. XCAP failed to meet the required standards from the very outset of its business and continued to have widespread failures for a number of months.”
The firm received a 20% discount on its fine for agreeing to settle at Stage 2 of the FCA’s executive settlement procedure. Otherwise it would have been fined £151,136.
In a statement XCAP said: “The company informed the FSA of the potential for breaches in September 2010, when certain failures were identified following internal compliance monitoring.
“It is accepted by the FCA that no client money or client assets were lost at any time and, as a result of the remedial action taken by management (including the systematic strengthening of systems and controls and the introduction of new bespoke client asset and money management technology), independent reporting has confirmed that XCAP has, since August 2011 at the latest, been in compliance with all appropriate regulations in respect of client money and client asset protection.
“XCAP has always been and remains committed to the safeguarding of client assets and money and supports the FCA’s expectations of firms that have responsibility for investor’s money and asset custody.”
