Barclays Capital fined £1.1m over handling of clients' money

Barclays Capital has been fined £1.1m by the Financial Services Authority for failing to keep its clients' money safe over an eight-year period. The penalty levied against the investment banking arm of Barclays is the latest in a series of regulatory actions against banks that have not kept clients' money separate from the banks' own reserves. It is also the second fine for Barclays since 2011 began – it has already been hit by a £7.7m levy over the way it sold two high-risk investment funds . The segregation of client assets has become a major issue for regulators following the collapse of Wall Street firm Lehman Brothers in September 2008, when it emerged that clients' funds had been merged with the bank's, making it difficult to untangle. At one point £752m was at risk at Barclays Capital, while the average daily amount of clients' money which was not segregated increased from £6m in 2002 to £387m in 2009. In the final notice published today, the FSA said: "Barclays Capital's failure to segregate client money intra-day for over eight years posed a significant risk of loss to its clients in the event that Barclays Capital became insolvent intra-day during the relevant period. If Barclays Capital had become insolvent intra-day there was the risk that its clients would have been classed as general unsecured creditors in the insolvency process, rather than claiming their money from a pool of protected client money." The money was intermingled for between five and seven hours within each trading day over an eight-year period, between 1 December 2001 and 29 December 2009, when Barclays uncovered the problem. Margaret Cole, FSA managing director of enforcement and financial crime, said: "Barclays Capital committed a serious breach of FSA client money rules by failing to segregate millions of pounds of its clients' money for over eight years. This posed a significant risk and the penalty reflects the amount of client money involved in this breach." "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 breaches of its client money rules. Adhering to these rules not only ensures greater protection of clients but of financial stability as a whole. The FSA's specialist client assets unit will continue to intensify its focus in this area," Cole added. The fine is considerably smaller than the £33m penalty imposed on JP Morgan in June 2010, after it left £15.6bn of client money at risk over a seven-year period . Barclays qualified for a 30% discount because it co-operated with the regulator. Without the settlement discount, the fine would have been £1.61m.