In the first penalty handed out under a new regime the FCA said the amount represented 2% of Xcap’s average client money balance plus 0.2% of its average client asset balance over the period of its breaches.
These new percentage levels were applied based on the seriousness of breaches, including the duration of them and the FCA said under this new approach it expected cases involving breaches of client asset rules will result in larger fines.
Xcap began trading on 29 June 2010 and between then and 31 August it breached FCA principle three on management and control of its business and principle ten on arranging adequate protection for clients’ assets.
Its breaches included failing to properly segregate client money from its own and failing to maintain accurate records and accounts.
If Xcap had become insolvent clients could have faced difficulties and delay in recovering their money and assets.
Tracey McDermott, director of enforcement and financial crime at the FCA, said: ““This is the first case that the FCA has brought for breaches of the Client Assets rules using our new penalty regime. The new levels of penalty are expected to result in larger fines, demonstrating the seriousness with which we view these failures and serving as a stronger deterrent to firms.
“We have been very clear about our expectations of firms that have responsibility for investors’ money and safe custody assets. Xcap failed to meet the required standards from the very outset of its business and continued to have widespread failures for a number of months.”
Xcap received a 20% discount on its fine for agreeing to settle at stage two of the FCA’s procedure, otherwise it would have been fined £151,136.
