5th Oct 2016 10:05
LONDON (Alliance News) - The Financial Conduct Authority said Wednesday it has fined the pension and fund wrap divisions of Aviva PLC for failures in oversight of the outsourcing of client asset administration, in its first fine for a breach over outsourcing arrangements.
The FCA fined Aviva Pensions Trustees UK Ltd and Aviva Wrap UK Ltd, subsidiaries of the FTSE 100-listed insurer, GBP8.2 million for a breach of the rules of the Client Assets Sourcebook rules.
Mark Steward, director of enforcement and market oversight at the FCA said: "Aviva outsourced the administration of client money and external reconciliations in relation to custody assets, but failed to ensure that it had adequate controls and oversight arrangements to effectively control these outsourced activities. Firms are reminded that regulated activities can be delegated but not abdicated."
"Other firms with similar outsourcing arrangements should take this as a warning that there is no excuse for not having robust controls and oversight systems in place to ensure their processes comply with our rules when CASS functions are outsourced," Steward added.
"This is the first CASS case in relation to oversight failures of outsourcing arrangements and we will continue to take action against firms that fall short of our CASS Rules," he said.
The FCA said Aviva agreed to settle the breach at an early date, qualifying for a 30% discount on its fine which would otherwise have been GBP11.8 million.
Client Asset Sourcebook rules are designed to ensure client assets are protected if a firm fails, obliging companies to keep those assets ring-fenced. The FCA said although there was no actual loss of money or assets in this instance, failures in Aviva's reconciliation process for assets in its custody saw an under-segregation of client money which peaked at GBP74.4 million between February 2014 and February 2015.
The FCA also said Aviva did not sufficiently challenge the internal controls, competence and resources of third-party administrators to which it had outsourced control of clients' money. The regulator added that Aviva had not dedicated adequate resources or technical expertise to client oversight, leading to delays in detecting the breach.
Shares in Aviva were up 0.3% at 449.00 pence Wednesday.
By Adam Clark; [email protected]
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