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The Financial Services Authority (FSA) today fined London based clearing firm, The Kyte Group Limited, £250,000 for systems and controls failings resulting in inadequate client money protection and poor accounting systems.
The FSA investigation found that between December 2001 and September 2003 Kyte failed properly to perform its client money reconciliations or client money calculations. It also failed to make and retain adequate accounting records which subsequently resulted in a misstatement of Kyte's balance sheet by approximately £7.2 million for the year ending 30 April 2003.
The failure by Kyte to take reasonable care to organise and control its affairs and to arrange adequate protection for clients' assets was considered all the more serious as the company did not take adequate steps in response to repeated warnings from both its auditors and the regulator.
Margaret Cole, Director of the FSA's Enforcement Division said:
"Client money is a core function for any firm with this permission and the risk of client loss is a serious issue. Firms must ensure they have robust systems and controls in place to secure the appropriate degree of protection for consumers and be able to maintain confidence in the financial system.
"Kyte had been given warnings that improvements needed to be made to its client money procedures and despite reassurances and a number of updates the required standard was not reached. Breaching our rules and principles will not be tolerated and we will not hesitate to take action when we find consumers or markets at risk."
The FSA recognises that although Kyte's failings occurred over a prolonged period of time, Kyte's conduct was not deliberate, and nor have any customers suffered actual loss as a result of Kyte's failings. Kyte has cooperated with the investigation and taken remedial action to improve its systems and controls and to implement appropriate procedures to ensure that since October 2003 it is compliant with the standards required under the regulatory system.
Kyte has corrected the misstatement of its balance sheet by making a prior year adjustment in its financial statements for the year ended 30 April 2004.
Background
- Kyte is a company incorporated in England and Wales which provides independent trading facilities, including broking and clearing, to predominantly professional clients ranging from private investors to multi-national institutions to trade futures and options either on their own accounts, as customers of Kyte or as proprietary sub-accounts of Kyte. The full text of the final notice is available on the FSA website.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
- The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.
