Two directors of a wealth management company have been fined and banned by The Financial Conduct Authority for "serious failings in relation to the protection of client money".

This actions of the firm "resulted in significant consumer detriment including contributing to a loss of approximately £3 million of client money", the FCA said.

David Gillespie, managing director, and David Welsby, finance director, of Pritchard Stockbrokers were the two men who have been given the penalties.

The regulator has also censured Pritchard, which offers stockbroking and wealth management services.

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FCA officials said the firm had been "recklessly failing to protect client money and committing a number of specific breaches of the FCA's client money (CASS) rules".
Pritchard entered Special Administration on 9 March 2012 and, were it not for its financial position, the FCA would have imposed a fine on it of £4,932,600.
Tracey McDermott, FCA director of the enforcement and financial crime division, said: "Ensuring that client money is properly protected is a basic, but fundamental, regulatory requirement.
"Gillespies and Welsby's conduct fell far short of our standards. Their recklessness contributed to a shortfall of £3 million of client money and resulted in significant consumer detriment.
"Under the FCA's CASS rules, client money should be held in a segregated client bank account. The rules are intended to protect client money if a firm becomes insolvent. Pritchard, Gillespie and Welsby failed to protect client monies for which they were responsible.
"Pritchard, Gillespie and Welsby recklessly relied upon the existence of an undocumented and opaque offshore facility in order to correct a deficit which had arisen in Pritchard's client money.
"The offshore facility was wrongfully included as an available client money resource when reconciling the amount of client money that needed to be segregated by Pritchard."
The FCA said consequences of Pritchard, Gillespie and Welsby's actions were:
a. client money was wrongly used to pay business expenses;
b. Pritchard failed routinely to pay sufficient funds into its client bank account to cover shortfalls in client money;
c. Pritchard placed reliance upon the offshore facility as a client money resource despite the fact that such a facility was not permitted to be included; and
d. the FCA was not informed when a shortfall in client money occurred.
This led to a loss of approximately £3 million of client money by the time Pritchard entered into Special Administration, officials explained.
Ms McDermott said: "Gillespie has accepted ultimate responsibility for the failings to protect Pritchard's client money.
"He also had the primary contact with the overseas company providing the offshore facility and assured his fellow director, Mr Welsby, of the existence of the offshore facility. Welsby relied on Mr Gillespie's assurances and failed to verify or confirm the existence of the offshore facility.
"In addition to being banned from the financial services industry, Gillespie and Welsby have been fined £10,500 and £14,000 respectively. They both provided verifiable evidence of serious financial hardship. Had it not been for this reduction and a discount for agreeing settlement of their cases, their penalties would have been £144,000 and £72,000 respectively."