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FCA kept Beaufort Securities alive for FBI fraud probe

FCA kept Beaufort Securities alive for FBI fraud probe

The Financial Conduct Authority kept Beaufort Securities alive so the FBI could conduct an undercover investigation, according to a report. 

The Times said the City watchdog had considered shutting down Beaufort in December but resisted due to concerns that the move would hamper the probe by US prosecutors. 

The claim comes after the watchdog declared the broker insolvent on the morning on 2 March. That afternoon the US Department of Justice charged Beaufort with fraud in relation to trading in the stock of a number of US companies and international money laundering.

It is said the FCA gave the firm a stay execution to allow US authorities enough time to gather the evidence required to bring the charges against the broker. 

FCA director of enforcement and market oversight Mark Steward told The Times the regulator had 'maintained a dialogue' with US authorities throughout the case. He stressed, however, that the US and UK investigations had been separate. 

'I won’t go specifically into what we were looking at because our investigations are ongoing; but clearly, once we realised we had issues with the same firm, we started a dialogue,' Steward said.

Earlier this year Wealth Manager revealed the Financial Ombudsman Service (FOS) had upheld a claim against Beaufort on the back of a stream of cases against the company.

A spokesperson said at the time: ‘We have been receiving a steady stream of cases over the last 10 months or so that we are in the process of looking into.’

They did not indicate how many cases there exactly were.

The decision to postpone Beaufort's insolvency raises questions over whether the financial watchdog was acting in the best interest of clients by allowing the firm to continue operating as an approved entity.  

According to Beaufort's administrators, PricewaterhouseCoopers (PwC), the wealth firm had 14,000 pensions and ISA clients who had invested £664 million of client assets and £37 million of client money.

However, clients could face a long wait to learn whether they will get their money back. 

Nigel Rackham, joint administrator and PwC director, said: ‘Our key priority is to safeguard the firms’ custody and client money holdings held for their clients. Once these positions are under our control and we have secured important trading and client data, we can start planning for the return to clients. However, this is likely to take some time.

‘The appointment of administrators, following the firms’ insolvency, will inevitably cause inconvenience and hardship to the firms’ clients and we will be working with relevant authorities to minimise that.’

The Financial Services Compensation Scheme (FSCS) said it is working 'as quickly as we can' to understand what this might mean for Beaufort's customers.




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