The Financial Conduct Authority (FCA) of the United Kingdom has announced today that they have fined the UK branch of a popular American equities broker Charles Schwab. This comes just days after the US Securities and Exchange Commission fined another popular equities broker – Robinhood for lapses in its efforts to provide customers with “best execution” of orders, among other things. The regulator, in this case, indicated that Charles Shwab failed “to adequately protect client assets, carrying out a regulated activity without permission, and making a false statement to the FCA.”
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said that “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.”
The breaches occurred between August 2017 and April 2019, after CSUK changed its business model. Client money was swept across from CSUK to its affiliate Charles Schwab & Co., Inc. (CS&C), a firm based in the United States. The client assets, which were subject to UK rules, were held in CS&C’s general pool, which contained both firm and client money and which was held for both UK and non-UK clients.
It’s interesting that such lapses took place at a reputable and regulated brokerage firm, one with many decades of experience and history of serving customers and maintaining all necessary regulatory filings and licenses. As this situation shows, even the most respected online trading institutions can get into trouble.
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