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BlackRock hit by ‘reputational damage’

Warnings that BlackRock name in the UK could be affected by giant FSA fine for unintentionally failing to protect clients’ money.

By Eleanor Lawrie | Published Sep 17, 2012 | comments

Advisers have warned that fund management giant BlackRock’s UK reputation may have suffered long-term damage, after it was fined £9.5m for putting clients’ money at risk.

The FSA last week revealed the firm had failed to put trust letters in place for certain money market deposits, and failed to take reasonable care to organise and protect client money.

The regulator said it took into account the fact the failings were “not deliberate or reckless” in deciding the penalty, and that there was “no actual loss to clients”.

“This is a big hit for BlackRock,” said Kevin Morgan, managing director of Consilium Financial Planning.

“The damage to reputation that comes with this fine is much more important than the actual money itself. The real concern is the threat to consumer confidence, which is imperative in financial services.”

Steve Laird, financial planner at Carrington Wealth Management, said: “This fine is pretty embarrassing for BlackRock... This episode doesn’t exactly increase our faith in the firm.”

However, Robert Lockie, partner at Bloomsbury Financial Planning, who recommends exchange-traded funds from BlackRock-owned group iShares, said the FSA announcement had not hurt BlackRock’s standing.

“I don’t think this episode will have a long term effect if BlackRock has sorted the problem out,” he said.

“People have short memories when it comes to fines. HSBC was fined earlier this year, but it didn’t mean I was going to move my bank account somewhere else.”

In a statement following the FSA announcement, BlackRock said: “Our fiduciary commitment to our clients is at the heart of our business.

“That is why when we identified this issue through an internal review and reported it to the FSA, we took steps to ensure we have what the FSA now describes as robust systems and controls relating to client money protection.”

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