Legal

UK Financial Regulator Bans Two Former Directors Of Wealth Management, Stockbroking Firm

Stephen Little, Reporter, London, 10 October 2014

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The Financial Conduct Authority has fined and banned two former directors of stockbroking and wealth management firm Pritchard Stockbrokers for "recklessly" failing to protect client money.

The Financial Conduct Authority has fined and banned two former directors of stockbroking and wealth management firm Pritchard Stockbrokers for "recklessly" failing to protect client money.

The UK regulator said in a statement that it had fined and banned managing director David Gillespie and finance director David Welsby, £10,500 ($16,931) and £14,000, respectively.  

The FCA has also censured the firm for recklessly failing to protect client money and committing a number of specific breaches of the FCA’s client money rules.

Pritchard entered Special Administration on 9 March 2012 and, were it not for its financial position, the FCA would have imposed a fine on it of £4,932,600.

“Ensuring that client money is properly protected is a basic, but fundamental, regulatory requirement.  Gillespie’s and Welsby’s conduct fell far short of our standards. Their recklessness contributed to a shortfall of £3 million of client money and resulted in significant consumer detriment,” said Tracey McDermott, FCA director of the enforcement and financial crime division .

Under the FCA’s CASS rules, client money should be held in a segregated client bank account to protect client money if a firm becomes insolvent.

The FCA said that Pritchard, Gillespie and Welsby failed to protect client monies for which they were responsible and “recklessly” relied upon the existence of an undocumented offshore facility in order to correct a deficit which had arisen in Pritchard’s client money.

This behaviour resulted in significant consumer detriment, including contributing to a loss of approximately £3 million of client money.

Gillespie has accepted ultimate responsibility for the failings to protect Pritchard’s client money. 

He also had the primary contact with the overseas company providing the offshore facility and assured Welsby, of the existence of the offshore facility. Welsby relied on Gillespie’s assurances and failed to verify or confirm the existence of the offshore facility.

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