Rowan Dartington writes off £1m from black hole after FSA fine

Embattled wealth manager Rowan Dartington has been forced written off £1 million from its books after the FSA slapped a £511,000 fine on the firm.

The FSA fined Rowan Dartington for failing to protect and properly segregate client accounts over a two year period.

As reported by Citywire last month, the problems with Rowan Dartington's new settlement system in May 2007 led to a serious of failures in protecting clients' monies. The regulator said Rowan Dartington 'did not exercise due skill, care and diligence to test and implement the Software.'

The FSA was damning of the back office work undertaken by the firm, stating: 'Rowan Dartington put in place a new software system in May 2007 but failed to properly test and implement it, which led to a breakdown in Rowan Dartington’s reconciliation processes.'

'The resulting problems meant that the firm could not rely on the accuracy of its internal books and records, and so could not be confident it was segregating the right amount of its clients’ money. It also contributed to Rowan Dartington being unable at the time of the FSA’s investigation to demonstrate the recoverability of up to £1.4 million of its own net assets in its accounting records.'

Client money at risk

The series of breaches occurred between May 2007 and September 2009. The FSA added: 'Rowan Dartington also placed its clients’ money at risk by failing to segregate client money for contingent liability business, including spread bets and options. The firm also failed to properly ensure it had the correct trust letters from its banks and counterparties.'

Because of these breaches, clients ended up losing 'minimal' amount of money but the FSA said losses were limited and have since been reimbursed. The FSA said: 'Rowan Dartington’s customers suffered only minimal actual detriment and all affected customers were reimbursed in 2007 when the late payments of interest were first identified. Furthermore, Rowan Dartington has undertaken that it will make good client money shortfalls, if any, when it completes its investigation of the £1.4 million shortfall.'

In its report on the failures within Rowan Dartington, the FSA said the wealth manager 'identified and reimbursed late payments of interest within approximately six weeks of the failure of the automated payments. The value of these payments was £1,821.07 in total.'

The FSA said Rowan Dartington is still unable to account for the £1.036 million of the 1.4 million black hole, though the wealth manager has informed the regulator that it has already 'fully provided' against this balance. The company will continue to look for the money in the mean time.