FSA fines BlackRock £9.5m for client money breaches
11 Sep 2012
The Financial Services Authority (FSA) has fined BlackRock Investment Management (UK) Limited (BIM) £9.5m for client money breaches.
The enforcement action came after it failed to protect client money adequately by not putting trust letters in place for certain money market deposits.
BlackRock also failed to take reasonable care to organise and control its affairs responsibly in relation to the identification and protection of client money.
The FSA revealed the errors occurred between 1 October 2006 and 31 March 2010 and were the result of systems changes that followed on from BlackRock group’s acquisition of BIM, which had previously been known as Merrill Lynch Investment Managers Limited.
It added the average daily balance affected by this failure was over £1.36bn and, had the firm become insolvent at any time during this period, clients would have suffered delay in securing the return of their funds and may not have recovered their money in full.
However, it has confirmed that no clients suffered any losses as a result of the error.
Tracey McDermott, FSA director of enforcement and financial crime, said: “Identifying and protecting client money should be at the top of every firm’s agenda.”
“We have repeatedly emphasised to firms that their systems and controls for ensuring this is the case must be robust and well designed and updated as circumstances change.”
“Despite being part of one of the largest asset managers in the world, BIM’s systems were simply not adequate, and the basic step of notifying banks that the money was held on trust for clients was not done.”
Because it reported the issue to the FSA, remedied the situation and settled at an early stage, BlackRock received a 30% discount on the financial penalty.
In a statement, the company said: “As the FSA itself noted, the situation that led to this settlement was not deliberate and no clients suffered any losses as a result of the error.”
“Still, we regret this instance where our UK procedures regarding money market deposits for a number of our clients were not consistent with applicable standards, and we are pleased to have fully resolved this matter with the FSA and that the matter is now closed.”
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