Aberdeen Asset fined £7m over client funds failings

The authority said the failures put clients at risk of suffering losses and delays in having their money returned if the FTSE-100 fund manager became insolvent.

Tracey McDermott, director of enforcement and financial crime said: "Where they fall short of our standards, firms should expect the FCA to step in and take action to avoid a poor outcome for their clients, and ultimately, consumers."

Noting the failings continued from 2008 to 2011, the authority said it imposed a "substantial" penalty that was intended to remind other firms of the seriousness of the issues involved.

The fine was calculated at a level of three on a sliding scale of severity that runs from one to five. The authority said it did not consider Aberdeen committed the breaches deliberately or recklessly.

Aberdeen did not profit from the breaches or avoid any loss," it added.

Aberdeen Asset Management said it had committed "inadvertent breaches" of UK client money rules that the company itself identified and reported to the regulator.

"The company regrets that the situation arose, has co-operated fully with the FCA in the course of its investigation and has amended its UK procedures regarding bank deposits following the FCA's guidance," said the company.

The FCA reduced the penalty by 30%, from £10,275,000, because Aberdeen agreed to settle promptly.

However, in the detailed notice of its decision, the authority said the penalty reflected what it regarded as serious breaches of some of the regulations in the Client Assets Sourcebook (CASS) by a firm with significant global operations.

The authority penalised Aberdeen Asset Management for failing to ensure funds placed on Money Market Deposit with banks were immediately identifiable by them as client monies.

It said: "Had Aberdeen become insolvent, these failings could have led to complications and delay in distribution, and placed client money at risk of set-off and consequential diminution."

The authority said Aberdeen failed to act on repeated prompts to think about how it handled client monies placed on Money Market Deposit. "Aberdeen failed to give proper prompt consideration to whether the Client Money Rules applied to the MMDs. Even though questions were raised in 2009 and 2010 by new employees joining Aberdeen following acquisitions, it was not until 2011, when a third party bank queried Aberdeen's arrangements, that it sought external advice on the issue, reported it to the authority and took steps to rectify the situation," said the FCA.

The authority noted the breaches occurred at a time of heightened industry awareness of the potential pitfalls involved with handling client money.

"There was a high level of awareness in the financial services industry at the time of the importance of handling client money properly given the collapse of Lehman Brothers on 15 September 2008. The authority had sent letters to compliance officers of regulated firms in March 2009 and to chief executive officers of regulated firms in January 2010 highlighting concerns about client money failings. The letter to chief executive officers required them to confirm that the firm complied with CASS. Aberdeen provided such confirmation," said the authority.

As Aberdeen Asset Management had £210bn funds under management at July 29, the prospect of the company entering the kind of insolvency proceedings that may have triggered the potential problems highlighted by the FCA seems remote. It is understood that around 60 client accounts were involved. The company has thousands of investors in its funds.

Shares in Aberdeen Asset Management closed down 2.5p at 365.5p.

The Client Assets Sourcebook was developed by the Financial Services Authority, the predecessor of the Financial Conduct Authority.