FCA Orders £31.7m Payment to WealthTek Clients After CACEIS Control Failures

What happened

CACEIS UK, an asset servicing bank that acted as depositary for WealthTek's investment funds, has been publicly censured by the Financial Conduct Authority and will make a voluntary payment of £31.7 million to former WealthTek clients. The FCA found that CACEIS UK failed to maintain adequate financial crime controls between 2017 and 2022, which contributed to the conditions that allowed WealthTek's shortfall to develop undetected.

WealthTek, a Newcastle-based investment firm, collapsed in March 2023 after the FCA identified a shortfall of approximately £64 million between client assets and what WealthTek's records showed should have been held. The firm was placed into special administration. Around 3,500 clients were affected, predominantly retail investors.

What CACEIS was found to have done wrong

The FCA's investigation found that CACEIS UK breached regulatory requirements by failing to have effective systems and controls to prevent, detect and report financial crime. As depositary, CACEIS had oversight responsibilities for the assets held on behalf of WealthTek's clients. The FCA determined that stronger controls could have identified the discrepancies in WealthTek's client assets at an earlier stage.

The FCA issued a public censure rather than a financial penalty against CACEIS UK directly, noting that CACEIS agreed to make the voluntary payment to clients and cooperated with the FCA's investigation. The voluntary payment of £31.7 million supplements funds already recovered through the WealthTek special administration process.

What this means for WealthTek clients

The £31.7 million voluntary payment is intended to supplement the funds already recovered through the WealthTek special administration and improve the outcome for affected clients. The administrators of WealthTek, who have been managing the distribution of recovered assets since 2023, will handle the distribution of the additional funds.

Clients who have already received distributions from the WealthTek administration may receive further payments. Those who have not yet registered claims should contact the WealthTek administrators. The Financial Services Compensation Scheme has also been involved in the WealthTek failure; clients who received FSCS compensation should note that any further payments may interact with amounts already received.

The broader significance

The WealthTek case highlights the role of depositaries and asset servicers in the investment management chain. Depositaries are appointed to provide an independent check on fund assets and are required under the FCA's rules to act in the interests of investors. The CACEIS case is a significant example of the FCA holding a depositary accountable for failings that contributed to investor losses at a fund it serviced.

The FCA's decision to issue a public censure rather than a direct financial penalty reflects CACEIS's agreement to make the voluntary payment and its cooperation with the investigation. The public censure is recorded on the FCA register and is permanent.

What investors should check

Retail investors holding assets through investment platforms, fund managers or similar structures should be aware that their assets are typically held separately from the firm's own assets under client money and asset rules. If a firm fails, a depositary or custodian should be holding the client assets independently. The WealthTek case illustrates that the effectiveness of these protections depends on the adequacy of the systems and controls maintained by all parties in the chain.

Investors with concerns about the safety of their assets should check whether the firm holding their investments is FCA-authorised on the FCA register, and whether the assets are held in a segregated client account or equivalent arrangement.

Frequently asked questions

What is CACEIS UK?

CACEIS UK is an asset servicing bank that provides depositary, custody and fund administration services to investment managers. It is part of the CACEIS group, owned by Credit Agricole and Santander. In its role as depositary for WealthTek funds, CACEIS was responsible for independent oversight of the client assets held by WealthTek.

What is a public censure from the FCA?

A public censure is a formal sanction issued by the FCA that is published on the FCA register and remains permanently recorded. It does not carry a direct financial penalty but is a significant regulatory action that records a finding of regulatory breach. The FCA typically uses public censures where a firm has cooperated fully and taken significant remedial action.

How will the £31.7 million be distributed to WealthTek clients?

The distribution of the £31.7 million voluntary payment will be managed through the WealthTek special administration process. Affected clients should contact the WealthTek administrators for information about their specific position and any further distributions.

What is the FSCS limit for investment losses?

The Financial Services Compensation Scheme protects eligible investment claims up to £85,000 per person per firm. The FSCS has been involved in the WealthTek failure. Clients who have already received FSCS compensation should note that any further recovery from the administration or voluntary payment may be subject to clawback arrangements with the FSCS.

How do I check if my investment firm has adequate controls?

Check that your investment firm and any platform or custodian holding your assets is FCA-authorised at register.fca.org.uk. Ask specifically how your assets are held and whether they are in a segregated client account separate from the firm's own assets. The FCA's client money and asset rules require FCA-authorised firms to protect client assets in this way.