Huge FSA fine for Investec broker

THE Financial Services Authority has fined City stockbrokers Carr Sheppards Crosthwaite £500,000 for serious compliance failures and numerous breaches of the regulator‘s rules.

The FSA said the firm, which has more than £5.8bn of funds under its management, had failed to keep up to date with regulatory developments. The regulator said the firm, part of financial giant Investec, had not kept updated information on its 20,000 private client customers.

It also could not show that it had taken all reasonable steps to ensure that their portfolios or accounts remained suitable, the regulator said.

Andrew Procter, director of enforcement at the FSA, said:

'If a compliance department is to be fully effective, it needs to keep up-to-date with regulatory requirements and market developments. The creation of the FSA has led to importance changes in the regulatory landscape with which CSC had failed to stay fully apprised.'

The fine is one of the largest handed down by the FSA for serious regulatory compliance failings and marks a continued step in the regulator‘s determination to get tough on firms who are in breach of the rules.

The discovery of rule breaches emerged as part of a routine supervisory visit to CSC in 2003. Deloitte & Touche, the accountancy firm, was fined £750,000 for similar breaches earlier this year.

The fine and the regulator‘s remarks about its client monitoring are a serious blow for Carr Sheppards Crosthwaite, which prides itself on providing a close personal service to customers.

A spokesman for the firm said they accepted the FSA‘s findings completely and had taken prompt action to address the shortcomings identified.

He declined to say whether the firm would take any action against the director responsible for the compliance department.

'We never comment on individuals employed by the firm,' he said, adding: 'We have co-operated fully with the investigation. The regulator has not said there were any deficiencies in our internal financial controls and at no stage was any of our clients‘ money at risk.'

Carr Sheppards Crosthwaite said it had written to all its customers in November to ensure its information on them was up-to-date.

It has also set up a detailed compliance monitoring programme and will provide regular reports to the FSA to ensure it continues to meet the regulator‘s rules.