The UK’s Financial Conduct Authority (FCA) has fined and banned David Gillespie, managing director, and David Welsby, finance director, of stockbroking and wealth management firm, Pritchard Stockbrokers for failings in relation to the protection of client money.
The regulator has also censured Pritchard for recklessly failing to protect client money and committing a number of specific breaches of the client money (CASS) rules.
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Under the FCA’s CASS rules, client money should be held in a segregated client bank account. The rules are intended to protect client money if a firm becomes insolvent.
Pritchard, which entered Special Administration in March 2012, would have been fined £4.93m had they not been in such precarious financial position.
FCA said Pritchard, Gillespie and Welsby failed to protect client monies for which they were responsible.
The regulator’s investigation also found that Pritchard, Gillespie and Welsby recklessly relied upon the existence of an undocumented and opaque offshore facility in order to correct a deficit which had arisen in Pritchard’s client money.
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By GlobalData"The offshore facility was wrongfully included as an available client money resource when reconciling the amount of client money that needed to be segregated by Pritchard," the FCA said.
FCA director of the enforcement and financial crime division Tracey McDermott said: "Ensuring that client money is properly protected is a basic, but fundamental, regulatory requirement.
"Gillespies and Welsby’s conduct fell far short of our standards. Their recklessness contributed to a shortfall of £3m of client money and resulted in significant consumer detriment."
