The UK Financial Services Authority (FSA) has
fined BlackRock Investment Management Limited (BIM) £9.5m ($15.3m)
for failing to protect client money adequately.

According to the FSA, BIM did not put trust
letters in place for certain money market deposits, while also
failing to take sufficient care of activities regarding the
identification and protection of client money.

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BIM confirmed the charges in a statement and
told PBI that the matter was now closed.

 

Trust letters

The FSA’s client money rules state that firms
must have a trust letter from any bank holding its client money to
ensure that, if the firm becomes insolvent, this money is easily
identifiable.

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The money must also be ring-fenced from the
firm’s own assets so it can be quickly returned.

BIM, one of the world’s largest asset
managers, allegedly failed to obtain letters relating to some money
market deposits placed with third party banks from 1 October 2006
to 31 March 2010.

The FSA’s statement added that the average
daily balance affected by this failure was more than £1.36bn.

 

Penalty discount

However, the UK regulator concluded that the
error was not deliberate and that BIM had reported the problem to
the FSA.

The FSA also said that no clients actually
lost money as a result of the error, and that BIM has since
remedied the situation while putting in place strong systems and
controls concerning client money protection.

BIM have said that a dedicated client money
team had been established, led by a managing director responsible
for oversight of BIM’s client money obligations.

The firm agreed to settle at an early stage
and received a 30% discount on the penalty.

Without the discount BIM would have been
forced to pay the FSA £13.6m.