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FSA penalizes BIM (UK) over client money breaches

The Financial Services Authority (FSA) has penalized BlackRock Investment Management (UK) (BIM) £9,533,100, for failing to ensure proper protection of client money.

The UK financial regulator accused the wealth manager for not putting trust letters in place for certain money market deposits, and for failing to take reasonable care to organize and control in relation to the identification and protection of client money.

FSA has laid a rule for protecting clients’ money to avert any loss in the event of a firm’s insolvency, and the firms must clearly identify and ring-fence the clients’ money from the firm’s own assets so that it can be promptly returned.

During the course of probe, the UK watchdog found that between 1 October 2006 and 31 March 2010, BIM failed to obtain such letters in relation to some of the money market deposits it placed with third party banks.

It further underlined that the error happened as a result of systems changes that followed on from BlackRock group’s acquisition of BIM, which had previously been known as Merrill Lynch Investment Managers.

In case of the failure of the firm, clients would have suffered delay in securing the return of their funds and may not have recovered their money in full, FSA said.

FSA director of enforcement and financial crime Tracey McDermott said, "Identifying and protecting client money should be at the top of every firm’s agenda."

"Despite being part of one of the largest asset managers in the world, BIM’s systems were simply not adequate, and the basic step of notifying banks that the money was held on trust for clients was not done.