LONDON (Reuters) - Britain’s markets watchdog has fined Aberdeen Asset Management 7.2 million pounds ($11.2 million) for failing to segregate clients’ money from its own over three years to 2011.
Regulators have been on alert since the collapse of Lehman Brothers bank in 2008 highlighted the difficulties customers can face in getting their money back if it is not kept separate.
Under Financial Conduct Authority rules institutions are required to ringfence client money so that if a firm fails money can be returned as soon as possible.
The FCA said the asset manager, one of Europe’s largest, failed to identify and properly protect uninvested customer money it placed in money market deposits with third party banks between September 2008 and August 2011 to earn short-term interest.
The average daily balance affected by the breach of FCA rules was 685 million pounds.
“Proper handling of client money is essential in ensuring that markets function effectively. Where they fall short of our standards, firms should expect the FCA to step in and take action to avoid a poor outcome for their clients, and ultimately, consumers,” FCA Director of Enforcement, Tracey McDermott said in a statement on Tuesday.
The company, which had 170 billion pounds under management in 2011, said it regrets what happened and that no clients suffered any loss from the breaches.
“Nor was there any risk of any client money being lost as a result of set-off... although there was a risk that clients could have potentially faced a delay in the return of their money in the highly unlikely event that the company became insolvent,” Aberdeen said in a statement.
“Aberdeen incorrectly determined that this money was not subject to FCA rules, which meant that they did not obtain the correct documentation from third party banks when setting up the affected accounts,” the watchdog said.
Following Lehman, regulators asked all asset managers in 2009 to make checks on customer money rules and Aberdeen had told the regulator in 2010 it was fully compliant, the FCA said.
The asset manager agreed to settle early, qualifying for a 30 percent discount to avoid a 10.3 million pound fine.
($1 = 0.6425 British pounds)
Reporting by Huw Jones, editing by Chris Vellacott and Louise Heavens