Client monies in the spotlight - Palmers Solicitors

Client monies in the spotlight

Recent stories hitting the headlines have highlighted the importance of businesses protecting client monies.

On 26 November, the Financial Conduct Authority (FCA) imposed a fine of £900,200 penalty on SEI Investments (Europe) Limited, which provides asset management and wealth management services.

Under FCA rules, firms it regulates must keep client money separate from the firm’s money in separate accounts, so that in the event of the firm’s insolvency, client money is returned to clients as quickly and easily as possible.

Other firms not regulated by the FCA, including solicitors, must also follow strict regimes to protect client monies while other businesses, such as lettings agents, must hold client money in separate accounts.

On 13 December, Joseph Newman and Kerry Sebestyen, directors of Kent lettings agent Joseph Richards Limited, were disqualified from acting as company directors for seven and five years respectively for failing to secure and pass on tenant’s deposits. The Canterbury company ceased trading in April 2012, owing more than £400,000 to creditors, of which over £100,000 was owed to tenants and landlords for deposits.

The case followed an investigation by the Insolvency Service. David Brooks from the service said: “The Housing Act 2004 places those who receive tenancy deposits under clear obligations to protect tenants and landlords from loss. If your company has failed and you have not taken seriously your responsibilities as a director when dealing with tenancy deposits, the Insolvency Service will investigate you and you could be removed from the business environment.”

In the SEI case, the firm co-operated with an FCA investigation, which found that between November 2007 and October 2012 it failed to ensure that it maintained its records and accounts in a way that ensured their accuracy, with failings found throughout its client money processes.

Tracey McDermott, the FCA’s director of enforcement and financial crime, said: “We have repeatedly emphasised the importance of ensuring that client money is adequately protected. Firms that hold client assets should ensure they continue to strengthen their management, oversight and controls in this area. We will continue to take action to ensure that procedures at firms meet our client asset requirements and action will be taken against firms that fall short.”

Palmers can provide expert advice on all insolvency matters, on regulatory compliance with client monies obligations and where businesses are looking to strengthen their client money procedures as good practice.

For more information, please visit our website or contact Andrew Skinner.