Charles Schwab received a fine from the U.K.’s Financial Conduct Authority for “failing to adequately protect client assets,” according to an announcement from the authority. The £9 million ($12 million) penalty was assigned to the financial services’ U.K. business for missteps compared to those made by Lehman Brothers.
All the customers affected by Charles Schwab’s breaches were retail clients and the failures in safeguards occurred from August 2017 until April 2019, according to the authority.
“As we saw with Lehman Brothers and subsequent cases, a lack of client asset protections can easily lead to increased costs to consumers and funds being trapped for long periods of time,” said Mark Steward, executive director of enforcement and market oversight at the FCA, in a statement. “Charles Schwab UK failed to get the correct permissions from the FCA; then failed to be open with us and, finally, failed to put in place the necessary safeguards to ensure, if required, there could be an orderly return of client assets.”
Despite making a false statement to the FCA, Schwab’s U.K. business took remedial actions in some cases, according to the announcement.
“There was no actual loss of client assets and CSUK stopped holding client assets from 1 January 2020,” the FCA stated.
"We regret the errors and are pleased this matter has been resolved,” according to a statement from Charles Schwab. "Charles Schwab UK fully cooperated with the FCA’s investigation, has addressed the issues identified, and agreed to a penalty of £8,963,200. Charles Schwab UK client money and assets were protected at all times in accordance with U.S. rules."
By settling, Charles Schwab U.K. received a lesser penalty, according to the announcement. The penalty otherwise would have been in excess of £12 million.
