The FSA has fined Barclays Capital £1.12m for failing to protect and segregate, on an intra-day basis, client money held in sterling money market deposits.
Under the FSA’s client money rules, firms are required to keep client money separate from the firm’s money in segregated accounts with trust status. This helps to safeguard and ring-fence the client money in the event of the firm’s insolvency.
For over eight years, between December 1, 2001, and December 29, 2009, Barclays Capital failed to segregate client money maturing from its sterling money market deposits on an intra-day basis.
Such client monies were segregated overnight but matured into a proprietary bank account and were mixed on a daily basis with Barclays Capital’s own funds, typically for between five and seven hours within each trading day. (article continues below)
The average daily amount of client money which was not segregated increased from £6m in 2002 to £387m in 2009.
The highest amount held in the account and at risk at any one time was £752m.
Had the firm become insolvent within the five to seven hours each day in which the funds were unsegregated, this client money would have been at risk of loss.