Doing The Right Thing? FCA's Clemency Comes At A Cost

The FCA has censured Sapia Partners LLP, a firm which had been involved with failed wealth management firm WealthTek. The FCA found the firm to have breached Principle 10 of the Principles for Businesses and the Client Money Organisational Arrangements Rule. Prompted by the regulator, Sapia has agreed, with assistance from its Luxembourg-based parent company, to make a substantial voluntary payment of over £19.6m. This voluntary payment, taken together with the firm's full cooperation with the regulator's investigation and its acceptance of the failings identified by the FCA, saw it avoid a £7.412m fine. Joint Executive Director of Enforcement And Market Oversight, Therese Chambers explained: '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.'

Sapia Partners began working with WealthTek (or Vertus as it was then known) in 2013, appointing it as an Appointed Representative (AR). WealthTek remained an AR of Sapia until the beginning of 2020 when it became directly authorised by the FCA. Sapia Partners did, however, continue to hold client money for WealthTek 'for several months' after the firm became authorised. For its purposes, the FCA has identified the 'relevant period' as being from January 2014 to October 2020.

During this time, the arrangements which Sapia had in place with respect to the client money attributable to WealthTek activities were not compliant with regulatory requirements. The FCA makes reference to both SYSC 5, which contains general rules on segregation of functions, and also to CASS 7.12, which requires adequate organisational arrangements to be in place which 'minimise the risk of the loss of diminution of client money, or of rights in connection with client money, as a result of misuse of client money, fraud, poor administration, inadequate record-keeping or negligence'.

The Final Notice sets out several findings which can be summarised as failures relating to policies and procedures, and failures relating to practice.

With regard to the former, the FCA reported, for example, that the firm could not provide the FCA with any policy or procedure document setting out its approach to CASS compliance which was in place prior to 2015; the policy in place in 2015 was found to be insufficiently detailed. The FCA also noted that a Client Money Policy which the firm first prepared in February 2017 appeared to remain in draft for a period, and that it was not clear when it came into force. A key takeaway is clearly the importance of ensuring that policies and procedures are sufficiently detailed to meet the FCA's expectations, and also to be useful to staff in an operational context.

With regard to the latter, in practice WealthTek staff were able to access and make payments from client money accounts with no intervention or approval required from Sapia. Additionally, reconciliations of the client money accounts were carried out by the same WealthTek staff involved in the process of approving payments. The reconciliations were also typically reviewed and signed off by an individual who was junior to the preparer.

Clearly, the lack of segregation of responsibilities exposed clients to risk; some £150m was deposited into client accounts during the relevant period. The arrangement also exposed Sapia, as principal, to a great deal of risk over the period; a fact which the subsequent enforcement action bears out.

The clemency which the FCA has shown in this case appears to support its stated focus on getting the right outcomes for consumers, including in the enforcement context. This was very much the tone of the address, 'Do the right thing: Part II' delivered by Therese Chambers at the City & Financial Global FCA Investigations and Enforcement Summit in October 2025.

With regard to the 'exemplary cooperation' demonstrated by Sapia, the Final Notice explains that the firm 'fully and comprehensively co-operated with the Authority from the outset of the investigation'. Accepting the failures which the regulator identified and providing documents and/or information promptly were also noted, as was commitment to resolving the matter. In terms of takeaways, early admission of failings and prompt provision of information appears to have been key to securing favourable treatment from the regulator. Substantial openness with the regulator, in line with Principle 11, is implicit. The FCA also commented on the firm changing its business model and, under the management of the new shareholder, enhancing its approach to regulatory compliance. It is difficult to understand exactly how Sapia's level of cooperation stands out from other examples and it may be the case that the main driver was a trade-off to secure the redress from Sapia's parent company given that the notice explains that Sapia itself would not have been able to pay this. Either way, firms may welcome more detail from the FCA on what exemplary cooperation sufficient to avoid a regulatory penalty looks like; perhaps a 'Do the right thing – Part III' – would be appreciated.

The regulator was also keen to note that it concluded its investigation in 12 months, further evidence of it picking up the pace in enforcement. However, it is worth noting that the FCA had ordered WealthTek to cease operations in Spring 2023, and that administrators had identified a shortfall in client money and assets of £81.4m by 6 April 2023. Therefore a number of years has still elapsed since the events in question took place and were known about.

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