The banks are at it again. Barclays has been fined £38 million for failing to separate investment clients’ funds from its own money. This is the second fine in three years. Apparently the previous fine of £1 million was not enough to encourage Barclays to comply with its legal obligation to separate clients funds from its own money.
Solicitors in England and Wales have been under an obligation to separate clients funds from their own money for more than seventy years. There were abuses before the Second World War, which led to some solicitors “investing clients’ money for their own benefit and at the risk of the clients. these abuses were stopped by rules which led to solicitors having to keep separate clients accounts and a failure to comply with the rules, usually led to the solicitor being struck of and refused permission to practice.
However there are many solicitors and few banks. While it is more complicated to police tens of thousands of solicitors to ensure that they comply with the rules, and less complicated to police a hundred or so banks, there are relatively speaking far more abuses by banks of the fiduciary relationship with their customers than there are by solicitors of the relationship with their clients.
If your solicitor is holding some money for you and is dishonest there is a compensation fund, to which all solicitors contribute, which will get your money back for you. If the bank’s dishonesty or other failure causes it to fold, then the taxpayer stumps up money for you, but no more than £85,000.
Common sense seems to indicate that it should be easier to make banks follow the rule than solicitors, simply because there are so few of them, but although they are few in number they are wealthy and powerful and Barclays, twice convicted of the same offence, can pay £38 million and simply write it off as another trading expense.