The Financial Conduct Authority Tuesday fined two Bank of New York Mellon units a total of £126 million ($185 million) for failing to comply with the FCA custody rules for the safe-keeping of client money.
The rules ensure that if a bank becomes insolvent, assets can be returned to clients as quickly and easily as possible. All FCA-regulated firms are required to have “adequate systems, controls, and records to facilitate this.”
The BNY Mellon Group is the world’s biggest global custody bank by safe custody assets. It provides custody services to 6,089 UK-based clients.
In Tuesday’s action, the FCA named the Bank of New York Mellon London Branch (BNYMLB) and the Bank of New York Mellon International Limited (BNYMIL).
“During the period of their breaches,” the FCA said, “the safe custody asset balances held by BNYMLB and BNYMIL peaked at approximately £1.3 trillion ($1.9 trillion) and £236 billion ($348 billion) respectively.”
The FCA said the BNY Mellon units failed to prevent the commingling of safe custody assets with firm assets from some proprietary accounts, among other things.
“The size of the fine today reflects the value of safe custody assets held . . . as well as the seriousness of the failings, and the fact that these failings were not identified by the firms’ own compliance monitoring,” the FCA said.
The offenses happened from November 2007 to August 2013.
The FCA’s Georgina Philippou said in a statement: “Had [the BNY Mellon units] become insolvent, the total value of safe custody assets at risk would have been significant.”
The FCA discounted the fine by 30% because BNY Mellon settled at an early stage.
The Financial Conduct Authority’s April 14, 2015 final order is here.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.