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KPMG admits misconduct in connection with client asset reports for BNY Mellon entities

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KPMG Audit (KPMG) and Richard Hinton (a partner) have admitted misconduct under the Financial Reporting Councils’ (FRC’) Accountancy Scheme in relation to their reports to the FCA on compliance by BNY Mellon entities.

The admission relates to reporting for The Bank of New York Mellon (International) Limited (MIL) and The Bank of New York Mellon London Branch (MLB) with the FCA’s Client Assets Sourcebook (CASS) for the year ended 31 December 2011.
 
A Formal Complaint has been delivered by the FRC’s Executive Counsel and a Disciplinary Tribunal will now be convened to decide what sanctions should be imposed.
 
KPMG and Hinton have admitted that their conduct fell significantly short of the standards to be reasonably expect of a member firm and member (respectively) of the ICAEW, in that they:
 
• Failed to give adequate consideration as to whether the records of custody relationships maintained by the BNY Mellon Group were compliant with the CASS rules and/or as to the implications for CASS compliance by MLB and MIL of the Global Securities Processing platform being maintained and operated by the BNY Mellon Group on a global group (rather than individual firm) basis; and as a result
 
• Failed to undertake sufficient audit procedures to support the opinions set out in the 2011 client asset reports made to the FCA
 
The allegations relate to custody assets held by MIL and MLB worth, at their peak, over GBP1 trillion. It is not alleged that clients lost money or assets as a result of the misconduct.  
 
The FRC’s investigation was opened in June 2015 following a referral from the FCA.
 
A date for the Tribunal hearing will be announced in due course.

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