Sapia, the principal of failed wealth manager WealthTek LLP, has agreed to pay more than £19m to WealthTek clients after failing to protect their money.
In a deal with the FCA, Sapia has agreed to make a voluntary payment of £19,637,950 to WealthTek clients.
The Financial Conduct Authority (FCA) has also censured the firm.
Of the £19.6m, WealthTek’s administrators will receive £19.1m and the Financial Services Compensation Scheme (FSCS) will receive £500,000.
Sapia started working with WealthTek in 2013 and later appointed it as one of its appointed representatives until WealthTek LLP became directly authorised from January 2020. In April 2023 the FCA took action to order WealthTek to cease operations and appoint administrators.
The appointed rep arrangement resulted in Sapia holding and being responsible for protecting client money for Newcastle-based WealthTek (FRN: 832264).
The FCA found Sapia did not put enough safeguards in place to protect this money and Sapia has admitted that it failed to properly separate key roles within its business relating to client money.
People who could make payments from client money accounts also carried out the checks of those accounts required by FCA rules. This lack of separation increased the risk that client money could be lost because of, for example, misuse or poor management, the FCA said.
The voluntary payment will be distributed to WealthTek clients who have a shortfall in the money they have been able to reclaim.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said: “Poor safeguards around client money create opportunities that bad actors can exploit. Sapia’s failures exposed clients to an unacceptable risk of losing their money.
“We decided not to impose a fine on Sapia because of its exemplary cooperation and its acceptance that it should make a voluntary payment to affected customers.”
The FCA has already fined Barclays Bank UK PLC £3,093,600 for poor handling of financial crime risks in relation to a client money account opened by WealthTek. Barclays also agreed to make a voluntary payment of £6.3m for distribution to WealthTek’s clients.
The administrators of collapsed wealth manager WealthTek have so far returned at least £95m to 904 clients although the overall client shortfall still stood at £80.8m as of late last year. In a progress report published last year, the administrators said they had returned £92.91m of custody assets and £1.98m of client money.
The administrators said they had been liaising with a number of SIPP providers in relation to client accounts. During the period they said five SIPP accounts were returned to clients to bring the total amount of SIPP accounts returned to 144.
WealthTek was an FCA-authorised and regulated wealth manager. It provided discretionary, advisory and execution-only services to its retail clients. The business, which also traded as Vertem Asset Management and Malloch Melville, was placed into special administration in April 2023.