BlackRock Investment Management (UK) (BIM) has been fined £9.53 million by the FSA after errors caused by systems changes put client money at risk.
The watchdog's client money rules require companies to have a trust letter from any bank holding its customer's cash to ensure that, in the event of the firm's insolvency, the funds are clearly identifiable and ring-fenced.
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.
The error happened because of Blackrock's acquisition of the unit, previously called Merrill Lynch Investment Managers, in September 2006 and subsequent migration of client portfolios to the buyer's operating system.
Tracey McDermott, director, enforcement and financial crime, FSA, says: "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."
The FSA says that in deciding how much to fine BIM it took into account that the misconduct was not deliberate, and that the firm reported the issue and has since put in place better systems and controls. No clients suffered any losses as a result of the error.
In a statement, BlackRock says: "At BlackRock, our fiduciary commitment to our clients is at the heart of our business. That is why when we identified this issue through an internal review and reported it to the FSA, we took steps to ensure we have what the FSA now describes as robust systems and controls relating to client money protection. These steps include establishing a dedicated client money team, led by a Managing Director responsible for oversight of our client money obligations."
Read the FSA's final notice:Download the document now 194.4 kb (PDF File)