UK FSA fines BlackRock Investment Management £9.5m

The UK Financial Services Authority 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 said.

The fine relates to the way BlackRock’s UK arm operated between 2006 and 2010, during which time the FSA said it had failed to obtain letters of trust in relation to money market deposits it placed with other banks.

The regulator said the error occurred as a 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.

The average daily balance affected by this failure was over £1.36bn, the FSA said,

Coming during a time of heightened fears over the financial strength of banks, the FSA said if the firm had 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.

Tracey McDermott, the FSA’s director of enforcement and financial crime, said: “Identifying and protecting client money should be at the top of every firm’s agenda. 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.”

In its reponse to the UK FSA action, BlackRock said: “At BlackRock, our fiduciary commitment to our clients is at the heart of our business. That is why when we identified this issue through an internal review and reported it to the FSA, we took steps to ensure we have what the FSA now describes as robust systems and controls relating to client money protection. These steps include establishing a dedicated client money team, led by a managing director responsible for oversight of our client money obligations.”

“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.”

 

This article was first published on Investment Week
with additional reporting by InvestmentEurope.

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