The Financial Services Authority has fined a firm formally owned by ING 560,000 for widespread failings in its systems and controls resulting in poor accounting systems and inadequate client money protection.
The failings at W Deb MVL occurred over a four and a half year period from December 1 2001 to May 3 2005.
The primary effect of these failures was that WDM, formerly known as Williams de Broe, was unable to monitor its own financial position or to comply with its financial reporting requirements adequately.
This resulted in the firm making total provisions of 66.3m in its accounts for 2004 and 2005 in respect of assets viewed as irrecoverable.
These provisions in turn led to concerns about the firm’s solvency and to its former parent company, ING, waiving loans totalling 58m to ensure it remained adequately capitalised.
The FSA found that WDM had breached four of the FSA Principles for Business as well as relevant FSA rules on client money.
It failed to establish and maintain accurate accounting records capable of producing the required statutory accounting and regulatory reports (Principle 3), and it failed to establish and maintain adequate systems and controls and/or records in relation to its accounts, cash balances and stock positions (Principle 3).
It also failed to act appropriately on repeated warning signals about the systems and controls failings identified by both internal and external auditors over a four and a half year period (Principle 2), and failed to establish and maintain effective client money procedures leading to its failure to carry out the calculation and segregation of client money for a five month period from November 1 2004 to March 31 2005 (Principles 3 and 10).
Finally, it failed to inform the FSA it had not carried out the client money calculation for a five month period (Principle 11).
There is no evidence that any clients have suffered any actual loss as a result of the firm’s failings.
Margaret Cole, director of enforcement at the FSA, says: “The FSA expects regulated firms to organise themselves so that they are capable of meeting their regulatory requirements and client obligations, this includes having appropriate systems and controls for monitoring its own financial position and safeguarding client money.
“The implementation and maintenance of appropriate systems and controls is essential to maintaining market and consumer confidence in the financial system and individual firms.
A firm that fails to meet these basic requirements can pose significant risks to its clients and ultimately its own financial health.”
In determining the level of penalty the FSA has taken into account the fact that WDM and ING identified potential regulatory issues at the firm in 2005 and acted properly and responsibly in reporting these to the FSA.
The firm, ING and, since it acquired the firm, Evolution Group, have been open and co-operative with the FSA in bringing this investigation to a prompt conclusion.
By agreeing to settle at an early stage of the FSA investigation WDM qualified for a 30% discount under the FSAs Executive Settlement Scheme and consequently the fine was reduced from 800,000 to 560,000.