The world’s largest global custody bank by safe custody assets, the Bank of New York Mellon, has been fined £126m by the UK's regulator, the Financial Conduct Authority (FCA), for breaking rules designed to protect more than £1tn worth of assets held on behalf of UK-based clients.
The bank stands accused of “failing to implement adequate organisational arrangements for safeguarding client assets” and ignoring rules published by the FCA in 2010 aimed at protecting client custody assets in the event of insolvency by keeping what are known as “entity specific records”.
Regulations obliging custodians to keep specific records about each client and their assets and accounts are in place to help an Insolvency Practitioner identify who owns which assets and ensure for these to be returned to them as quickly as possible.
BNY Mellon failed to keep clients’ money separate from its own funds and used global platforms to manage clients’ safe custody assets instead, making it impossible to maintain books and records on an entity-specific basis.
More worryingly still, some clients’ assets lodged in omnibus accounts, were being used without consent to settle other clients’ trades, highlighting once again the continued issue in terms of shareholder rights for those investors whose shareholdings are stuck in such nominee or omnibus accounts.
- Funds Europe, FCA fines BNY Mellon £126 million over Custody Rule
- The Guardian, Bank of New York Mellon fined £126m by regulator for 'failings