Risk & Compliance

British FSA Cites Deloitte Unit for Compliance Flaws

The Financial Services Authority imposes its largest fine ever against a financial advisory firm.
Stephen TaubJanuary 29, 2004

A unit of Deloitte & Touche was fined $1.4 million on Wednesday by Britain’s financial watchdog for serious compliance failings, according to Reuters.

The Financial Services Authority stated that the fine against Deloitte & Touche Wealth Management Ltd. was the largest it has ever levied against a financial advisory firm and underscored the FSA’s commitment to get tough on enforcement.

The regulator added that if new management had not been installed by the Deloitte unit in 2002, the FSA would have put DTWM out of business for misselling products and poor record-keeping that lost customers money, according to the wire service.

“Effective compliance procedures are fundamental to consumer protection and are not to be disregarded by a firm’s senior management,” said Andrew Procter, FSA director of enforcement, according to the report.

The FSA said the firm’s failure to carry out a key pensions review on time could have been avoided if the parent company had plenty of specialists in this area, said Reuters. Those specialists, however, were deployed to work for paying clients.

“We very much regret this matter, which arises from regulatory failures in our subsidiary Deloitte & Touche Wealth Management Ltd between 1997 and 2001,” said Gerry Paisley, the managing partner responsible for regulation and risk management at Deloitte & Touche, according to the report. “When the issue was identified, swift and decisive action was taken to shut down the business. It was subsequently restarted under entirely new management in 2002.”

The FSA’s fine is three times that levied on wealth-management firm St. James’s Place in November for serious inadequacies in monitoring and record-keeping, reported Reuters. That was also around the time that chairman Callum McCarthy and chief executive John Tiner took over at the FSA.

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