The regulatory body announced its intention to review the practices of firms at the end of March this year and subsequently conducted a thematic review of 16 authorised firms.
Following the review, the DFSA has highlighted three main areas of concern, although it said it had not seen any evidence to suggest clients had lost money due to any of the noted failings.
The DFSA said a number of firms subject to the review were not able to “satisfactorily demonstrate their prior assessment of third party agents” holding client money on their behalf and reminded firms a suitability assessment must be carried out prior to handing over client money. It added there should also be systems and controls in place to ensure the third party continues to remain suitable.
It also reminded firms once a third party has been selected it must ensure it receives a written acknowledgement from the third party stating, among other things, it is “not entitled to combine the account with any other account or to exercise any charge, mortgage, lien, right of set-off or counterclaim against money in that account in respect of any sum owed to it on any other account.”
The regulator also warned firms if they hold client money themselves they must ensure its auditor produces a client money auditor’s report – this also applies if the firm holds insurance money or investments on a client’s behalf.
