26 June 2015
The Financial Reporting Council (FRC) is investigating KPMG in connection with BNY Mellon’s client asset practices.
The investigation relates to KPMG’s role in reporting to the FSA on BNY Mellon’s compliance with the FSA’s client asset rules for the years ended 31 December 2007 to 31 December 2011.
The decision to investigate follows the FCA Final Notice in respect of BNY Mellon published on 14 April 2015.
The FCA fined BNY Mellon’s UK and US branches for failing to comply with the FCA Client Assets Sourcebook (Custody Rules, or CASS), which applies to safe custody assets and to client money.
The Custody Rules require firms to keep entity-specific records and accounts. Entity-specific records and accounts are important in the event of an insolvency as they will be used by an Insolvency Practitioner to identify those clients whose assets are safeguarded and are due to be returned.
Instead, the Firms used global platforms to manage clients’ safe custody assets, which did not record with which BNY Mellon Group entity clients had contracted. This failing meant that the Firms were unable to meet their other obligations under the Custody Rules.