The FCA has imposed restrictions on a London wealth manager CFS Management Ltd over concerns that millions of pounds of client and firm money was being held in the same accounts.
CFS has been barred by the FCA from accepting any new client money or new custody assets, from either existing or new clients, in any of its business areas.
CFS Management Ltd (FRN: 171480) is based at 55 Riding House Street, London, W1W 7EE.
The restrictions were imposed by the FCA on 16 March but have only been published this week.
In a First Supervisory Notice published this week, the FCA says it believes the firm may have been failing to properly segregate over £10m of client and firm money.
The regulator has imposed a number of restrictions on the firm including a ban on disposing of firm assets.
FCA concerns about the segregation of client and firm money were flagged up by the FCA initially in a ‘Dear CEO’ letter in 2020 sent to many industry CEOs.
Following the ‘Dear CEO’ letter concerns were raised at the firm about its segregation of client and firm money.
On 28 March 2022, a feedback letter was sent to the firm by the FCA setting out the authority’s concerns about its CASS (client assets) compliance, and the steps which the firm was required to undertake to deal with these concerns.
The feedback letter stated that the authority’s, “findings indicate significant weaknesses in the Firm’s CASS risk framework and its systems, governance, and controls”.
CASS (or Client Assets Sourcebook) rules cover the way firms must treat client and firm assets and cash.
The FCA says it has acted to secure, “an appropriate degree of protection for consumers and protecting and enhancing the integrity of the UK financial system.”
According to the notice, which the firm has a right to appeal, the firm, “failed to ensure that client money is held in a properly segregated client money account in breach of the rules in CASS 7.13.3R, 7.13.6R and 7.13.12R.”
The firm acknowledged that at present firm money and client money may be held in the same accounts.
Client money held at the end of February 2023 was just over £10m.
As at 7 March 2023, the firm had 91 active clients, providing execution-only services to them. The firm says 90 of these clients were professional clients and one was a professional counterparty. The firm has two custody clients. Of the 91 clients, 45 are individuals and 46 are corporate entities.
CFS is an authorised Wealth Manager and Retail Investment Broker and has been authorised since 1 December 2011. Its permissions include safeguarding and administration of assets, advising on investments (ex-pension transfer/opt outs) and making arrangements with a view to transactions in investments.
