SEI Investments was fined £900,200 (€1.1 million) by the Financial Conduct Authority (FCA) for failing to protect client money on several occasions between November 2007 and October 2012, although there was no actual loss of client money.
In a statement, the UK regulator says that SEI Investments failed to ensure that any shortfall or excess was paid into, or withdrawn from, the client bank account by close of business on the day of the internal reconciliation.
It also notes that SEI “failed to appreciate that it was using a non-standard method of internal reconciliation”.
Under the FCA’s client money rules, client money needs to be kept separate from the asset managers’ money in client bank accounts with trust status.
The FCA says it found failings “throughout SEI’s client money processes”, arguing that arrangements were inadequate and employees were inadequately trained.
On one occasion, the FCA says, an SEI employee, who had not received any training in FCA Client Asset Sourcebook (Cass), manually adjusted SEI’s client money requirement from the £14 million calculated using the internal client money reconciliation to £932,000.
He did this, the FCA says, based on the assumption that the £14 million shortfall was of an unprecedented amount and was therefore inaccurate.
Had SEI become insolvent, these failings could have led to complications and delay in distribution and placed client money at risk.
The average daily balance of the client money accounts during the relevant period was approximately £84.3 million.
SEI says it has “resolved a historic and technical issue”and that it has since invested significantly in reviewing and enhancing the process. The asset manager argues that the FCA’s observations centered on Cass training and a technical calculation methodology, and that its client money calculation had been certified annually since 2007 by SEI’s Cass auditors as compliant.
Tracey McDermott, director of enforcement and financial crime at the FCA, says: “Whilst the FCA considers the failings to be serious, there was no actual loss of client money in this instance … [however] had SEI suffered an insolvency event during this period, customers could have suffered loss due to SEI’s non-compliance with the client money rules.”
SEI agreed to settle at an early stage and in doing so it qualified for a 30% discount. Without the settlement discount, the fine would have been almost £1.3 million.
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