FSA warns City banks over client funds

• Financial Services Authority threatens to step in to ensure client funds are kept separate


• Concern over handling of assets first surfaced after Lehman Brothers' collapse

City firms are being warned by the Financial Services Authority that they face fines and public reprimands unless they comply with its request to name the individuals responsible for ensuring clients' money is kept separate from overall funds.

A letter from Sally Dewar, managing director of risk at the FSA, warns that the regulator could go as far as to demand that a company appoints a "skilled person" – an expert from outside the firm – to conduct the necessary work to provide a report to the regulator.

She gives firms until 30 June to respond to a request first made in January, when the regulator found "significant weaknesses" in the ways that client funds were being handled by companies providing investment banking services.