Firms are required, under the FSA’s client money rules, to keep client money separate from money belonging to the firm in segregated accounts with trust status, protecting it in the event of the firm’s insolvency.

In the case of Rowan Dartington, the firm put a new software system in place in 2007 but failed to test and implement it properly, according to the FSA. Consequently, Rowan Dartington “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,” said the regulator. Another consequence was that, at the time of the FSA’s investigation, the firm was unable “to demonstrate the recoverability of up to £1.4 million of its own net assets in its accounting records”.

The firm has since written off £1.036 million of the £1.4 million net assets, however no clients suffered financial losses due to the regulatory breaches, said the FSA.

Rowan Dartington cooperated fully with the investigations and agreed to settle the matter quickly, due to which it received a 30 per cent discount on its fine.

In the case of Close Investments, the firm failed to hold clients’ money in segregated accounts with trust status, and to implement “adequate controls” over client money in keeping with FSA rules. Over a period of two years the firm failed to verify that certain accounts – related to a number of collective investment schemes it managed – had been set up in the appropriate way.

Close Investments told the regulator when it identified the problem and cooperated with the investigation, also settling quickly and receiving a 30 per cent discount.

The FSA has strengthened its focus on regulating firms’ handling of client money and assets recently, establishing a new unit dedicated to this issue, and earlier this month fining JP Morgan Securities £33.32 million – the largest fine it has ever issued – for failing to protect client money by segregating it appropriately.