Charles Schwab Fined £9M Over UK Client Account Failings

Posted on December 23rd, 2020 at 9:10 AM
Charles Schwab Fined £9M Over UK Client Account Failings

From the Desk of Jim Eccleston at Eccleston Law LLC:

On Monday, the U.K.’s financial services watchdog fined Charles Schwab £8.96M ($11.86M) for violating rules on protecting client assets and making a false statement to the regulator.

Charles Schwab failed to protect its retail customers, despite being required to provide the highest level of asset protection. According to the Financial Conduct Authority, Schwab did not comply with British regulations and the lack of protections can lead to increased costs to clients and cause funds to be unavailable for extended amounts of time.

In 2017, Charles Schwab made changes to its business model, moving money from its business in the U.K. to its operations in the U.S. This change meant that clients’ money was held in an account that also held the company’s funds. Charles Schwab failed to keep accurate records to identify clients’ money and did not have systems in place to return money quickly to clients.

Charles Schwab also failed to get permission from the FCA to ensure the necessary safeguards for timely returns of client assets, as well as, failing to notify regulators of the breach. They also claimed that their auditors confirmed they had proper client asset protections in place.

The original fine was more than £12.8M.  Schwab agreed to settle the case for a lesser amount, stating it has fully cooperated with the investigation and has addressed the issues.  

Tags: ecceleston, ecceleston law, charles schwab, uk client, fines

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