The firm, which offers one of the UK’s largest wrap platforms Transact, was fined by the FSA for failings in its protection of client money.
Following a visit to Integrated Financial in May 2010 the FSA found while it had segregated client money from its own money on receipt, it had failed to comply with client money rules for a nine-year period from December 2001 to June 2010.
During this time the amount of client money held by Integrated Financial averaged £508m.
Over the period of breach, Integrated Financial did not perform any client money calculations and as a consequence failed to identify or fund any shortfalls in its client money bank accounts.
This meant money belonging to one client was used to cross fund other clients and resulted in clients’ money being at risk if the firm became insolvent, the regulator explained.
Another breach by Integrated Financial was the failure to put in place adequate trust documentation for three of its 28 client bank accounts, which again put their money at risk in the event of the firm’s insolvency.
Tracey McDermott, acting director of enforcement and financial crime, said: "Integrated Financial has committed a serious breach by failing to comply with our client money rules for a significant period of time.
"The FSA has repeatedly emphasised the importance of ensuring that client money is adequately protected and in the past year has taken enforcement action against firms of all sizes for breach of its client money rules."
As it settled early Integrated Financial qualified for a 30% discount on its fine, otherwise it would have been charged £5m.
The FSA also required the company to appoint a skilled person to review its client asset process and it agreed to comply with the recommendations.
No clients of Integrated Financial suffered any losses as a consequence of the breaches identified.
Ian Taylor, chief executive officer at Integrated Financial Arrangements, said: "Achieving the highest standards in regulatory compliance is of central importance to our business; we will work tirelessly to reassure our clients, shareholders, staff and business partners that the problem is in the past and we are now fully compliant."
