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London - Two former directors of Pritchard Stockbrokers, a defunct broker and wealth manager, have been fined and banned from the UK financial services industry after failing to protect client money in the latest crackdown by Britain's financial watchdog.
The Financial Conduct Authority (FCA) said on Thursday that the recklessness of managing director David Gillespie and finance director David Welsby contributed to a loss of around £3.0m ($5m) to Pritchard's clients by the time the firm went into administration in March 2012.
The two men relied on an undocumented and opaque offshore facility to correct losses in Pritchard's client money, the FCA added, leading to a string of failings including client money being wrongly used to pay for business expenses.
Pritchard also failed to inform the FCA about the shortfall in client money.
Under FCA rules, client money has to be held in a segregated client bank account, offering customers protection if companies become insolvent.
Gillespie and Welsby both cooperated with the investigation and have been fined £10 500 and £14 000 respectively, after both claimed serious financial hardship. Their fines were reduced from £144 000 and £72 000 respectively.
Had Pritchard not entered administration, it would have been fined £4.9m, the FCA said.
