Under the regulator’s client money rules, firms are required to keep client money separate from the firm’s money in client bank accounts with trust status.
Between November 2007 and October 2012, the FCA said SEI failed to perform the necessary internal reconciliations to ensure that any shortfall or excess was paid in or withdrawn from the client bank account.
SEI therefore failed to ensure that it maintained its records and accounts in a way that ensured accuracy.
The firm also failed to train employees with operational oversight and responsibility for client money. The FCA said one SEI employee, who had not received any CASS training, manually adjusted SEI’s client money requirement from the £14m calculated using the internal client money reconciliation to £932,000 on the basis of his assumption that the £14m shortfall was of an unprecedented amount and was therefore inaccurate.
If SEI had become insolvent, these failings could have led to complications and delay in distribution and placed client money at risk. The average daily balance of the client money accounts during the relevant period was approximately £84.3m.
Tracey McDermott, FCA director of enforcement and financial crime, said: “SEI has committed a serious breach by failing to comply with our client money rules for over five years. We have repeatedly emphasised the importance of ensuring that client money is adequately protected and we have taken a number of enforcement actions against firms of all sizes for breaches of our rules in recent years.
SEI, which cooperated with the FCA during its investigation, invested in external consultants, and has restructured its operational model.
It agreed to settle at an early stage and in doing so it qualified for a 30% discount. Without the settlement discount, the fine would have been £1.29m.
A spokesperson for SEI said: “While SEI regrets that this situation arose, at no time was any loss or detriment caused to any of SEI’s customers. All client money was fully segregated from SEI assets at all times, with appropriate trust protection.
“SEI has since invested significantly in reviewing and enhancing, where appropriate, its CASS arrangements. In March 2013, SEI obtained approval of its CASS arrangements from external experts approved by the FCA. SEI has used this review to continue to thoroughly test all areas of CASS compliance and significant investment continues to be made in technology and training to ensure SEI is in the best possible position to fully adhere and adapt to the evolving regulatory framework.
“SEI will continue to work to ensure industry best practice in client money protection, as it does in all aspects of compliance and customer service.”
