Investment firm Sapia Partners LLP is voluntarily paying £19.6 million to investors that lost money to alleged misconduct by another firm that it worked with — avoiding a large penalty from the U.K. Financial Conduct Authority (FCA).
In 2023, the FCA ordered a firm, WealthTek LLP — which also operated as Vertus Asset Management LLP — to cease operations amid concerns that millions of client money was missing. The firm’s principal was later charged with various criminal offences including fraud and money laundering.
Those allegations haven’t been proven in court. A trial has been scheduled for September 2027 at Southwark Crown Court in the criminal proceedings.
Now, the FCA has settled with a corporate finance firm, Sapia, which began working with WealthTek in 2013, and appointed it as an authorized representative.
That arrangement made Sapia responsible for client money that was generated by WealthTek’s activities, and the FCA alleged that Sapia didn’t implement adequate controls to protect this money.
The FCA said Sapia admitted that it failed to properly separate key roles within its business relating to client money, which increased the risk that money could be lost through misconduct or mismanagement.
In a settlement with the firm, the regulator censured Sapia for failing to adequately safeguard clients’ assets, but the FCA indicated that it decided not to impose a fine, given the firm’s exceptional cooperation with its investigation, its admissions of wrongdoing and its voluntary payment of £19.6 million to investors that lost money through WealthTek.
Absent these factors, the FCA would have fined the firm £10.6 million — although this would have been reduced to £7.4 million for settling the case, it said.
“Poor safeguards around client money create opportunities that bad actors can exploit. Sapia’s failures exposed clients to an unacceptable risk of losing their money,” said Therese Chambers, joint executive director of enforcement and market oversight at the FCA, in a release.
“We decided not to impose a fine on Sapia because of its exemplary cooperation and its acceptance that it should make a voluntary payment to affected customers,” she added.
Previously, the FCA fined Barclays Bank UK PLC £3.1 million for its “poor handling of financial crime risks in relation to a client money account opened by WealthTek.”
In that case, Barclays also agreed to make a voluntary payment of £6.3 million to former WealthTek clients.