FCA Fines Charles Schwab UK £9 million for Failing to Protect Client Assets

The Financial Conduct Authority (FCA) has fined Charles Schwab UK (CSUK) £8.96 million for failing to arrange adequate protection for its clients’ assets under UK rules.

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Charles Schwab UK (UK:0L31) a subsidiary of U.S.-based parent company, Charles Schwab & Co. (SCHW), was granted authority to provide several regulated activities, including the safeguarding and administration of assets in 2003.

The breaches occurred between August 2017 and April 2019 after the company made changes to its business model.

Mark Steward, executive director of enforcement at the FCA said, “Charles Schwab UK failed to get the correct permissions from the FCA; then failed to be open with us and, finally, failed to put in place the necessary safeguards to ensure, if required, there could be an orderly return of client assets.”

The FCA noted, however, that CSUK did take some remedial action at various points after discovering the breaches and that there was no actual loss of clients’ money.

CSUK agreed to resolve the matter and was therefore granted a 30% discounted fine of £8,963,200. (See UK:0L31 stock analysis on TipRanks)

On December 1, Wells Fargo analyst Christopher Harris upgraded his rating on the stock to a Buy, raising his price target from $44 to $58, (16% upside potential). Harris sees Schwab increasing its earnings, partly due to its recent acquisition of TD Ameritrade and acknowledged the opportunity to convert TD Ameritrade customers into fee-paying advisory customers.

Overall, consensus among analysts is a Moderate Buy based on 6 Buys and 5 Holds. The average price target of $51.50 implies an upside potential of around 3% over the next 12 months.