FCA fines Charles Schwab UK £8.96 million - Thistle Initiatives

What has happened?

In December 2020, the FCA fined Charles Schwab UK Ltd (CSUK) £8.96 million for failing to adequately protect its client assets, carrying out a regulated activity without permission and making a false statement to the FCA.

What do you need to do?

The breaches occurred between August 2017 and April 2019, when client money was swept across from CSUK to its affiliate Charles Schwab & Co., Inc. (CS&C), a firm based in the United States. The client money, which was subject to UK rules, was held in CS&C’s general pool, which contained both firm and client money and which was held for both UK and non-UK retail clients. CSUK relied on the systems and controls operated by CS&C under US rules to ensure the safety of its customers’ client money and other assets. However, this reliance was insufficient as CASS requirements were not the same as US rules and in some respects, they provided a higher standard of protection than US rules for CSUK customers.

CSUK failed to arrange adequate protection for its clients’ assets under UK rules since the firm:

• • did not have the right records and accounts to identify its customers’ client assets,
  • did not undertake internal or external reconciliations for its customers’ client assets,
  • did not have adequate organisational arrangements to safeguard client assets, and
  • did not maintain a resolution pack, which would help to ensure a timely return of client assets in an insolvency

CSUK carried out a regulated activity without permission as the firm 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 made a false statement to the FCA when, without making adequate enquiries to check whether this was correct, the firm inaccurately informed the FCA by email that its auditors had confirmed that it had adequate systems and controls in place to protect client assets.

How can we help you?

If you’d like to know more about how we can help you with your CASS regime, or with any other aspect of FCA compliance, our expert team is here to help. Contact us today on 0207 436 0630 – or email info@thistleinitiatives.co.uk.