In response to an approach by the FSA to check its compliance with CASS, the regulator’s sourcebook that details how firms need to treat client money, Towry failed to fulfil its obligations.
The city regulator said Towry had stated it was fully compliant, when in realtiy it was not and its breaches were only found when the FSA visited the firm as part of a CASS investigation.
Towry’s failure to provide an accurate response to the FSA on this issue was a breach of Principle 11, which requires firms to deal with the FSA in an open and cooperative manner.
The initial failure to treat client money in the correct way breached Principle 10.
In a statement the FSA said it considered Towry’s failings to be particularly serious for a number of reasons.
Specifically these were that:
– Dear CEO letters are an important regulatory tool used by the FSA to raise significant issues and firms must consider them with particular care;
– The firm failed to ensure the response to the Dear CEO letter was properly considered and checked before being sent, resulting in inaccurate information being provided to the FSA;
– Towry’s CASS breaches could have placed clients’ money at risk of potential loss or delay in distribution if the firm had become insolvent because it failed to maintain adequate records;
– Towry failed to identify the breaches itself. Instead, the matters came to the FSA’s attention during an FSA visit to the firm in November 2010;
In response to the fine Towry said it accepted the action taken by the regulator.
Andrew Fisher, chief executive of the firm, said: "While I am pleased to confirm there has been no client detriment or loss of any client money at all, it is regrettable that we have made these errors.
"We have cooperated fully with the FSA and have made changes to our processes, working with our auditors KPMG to address the problems identified."
Towry agreed to settle at an early stage, which will entitle it to a 30% discount on its fine.
