KPMG admits misconduct over BNY Mellon asset failings

KPMG admits misconduct over BNY Mellon asset failings

Audit firm KPMG and one of its partners have admitted misconduct over the audit work the firm carried out for Bank of New York Mellon.

The admissions were made to the Financial Reporting Council and relate to the bank’s compliance with the Financial Conduct Authority's rules on keeping client assets safe while they are under a firm's control.

The allegations relate to £1trn of client assets held by BNY Mellon and its London subsidiary, but no client was disadvantaged by the actions of KPMG or BNY Mellon.

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The partner involved is Richard Hinton and the activities covered by the admission relate to the year ended 2011.

KPMG and Mr Hinton agreed they failed to give due consideration to whether records of custody relationships maintained by BNY Mellon were compliant with client assets sourcebook rules, and/or the implications of BNY Mellon’s decision to maintain such records on a group basis, rather than through its subsidiaries.

KPMG and Mr Hinton also acknowledged a failure to undertake sufficient client audit procedures to support the options set out in the 2011 client asset reports to the FCA.

The next stage of the investigation is an FCA tribunal, which will convene at a future date. The FCA investigation has been running since 2015.