FCA slaps Charles Schwab UK with £9m fine over compliance failures
The Financial Conduct Authority (FCA) has fined Charles Schwab's UK business £8.96m for failing to protect client assets, carrying out a regulated activity without permission and making a false statement to the watchdog.
The FCA said the breaches, which occurred between August 2017 and April 2019, affected retail customers at the financial services firm. Client money was swept across from CSUK to its affiliate Charles Schwab & Co (CS&C), a firm based in the United States.
The client assets, which were subject to UK rules, were held in CS&C's general pool, which contained both firm and client money and which was held for both UK and non-UK clients.
Charles Schwab UK failed to get the correct permissions from the FCA; then failed to be open with us and, finally, failed to put in place the necessary safeguards to ensure, if required, there could be an orderly return of client assets."
According to the watchdog, CSUK carried out a regulated activity without permission, did not at all times have permission to safeguard and administer custody assets, and failed to notify the FCA of the breach when applying for the correct permission.
CSUK also made a false statement to the FCA. According to the financial regulator, the firm inaccurately informed the FCA that its auditors had confirmed that it had adequate systems and controls in place to protect client assets.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: "Charles Schwab UK failed to get the correct permissions from the FCA; then failed to be open with us and, finally, failed to put in place the necessary safeguards to ensure, if required, there could be an orderly return of client assets.
"As we saw with Lehman Brothers and subsequent cases, a lack of client asset protections can easily lead to increased costs to consumers and funds being trapped for long periods of time.
"Firms, including newly-established businesses or firms coming into the UK from overseas, are responsible for ensuring they comply with our rules, and are expected to make sure they have the right protections in place."
CSUK agreed to settle the case and qualified for a 30% discount. The financial penalty would otherwise have been £12,804,600.
This article was first published by our sister title Investment Week
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