The audit regulator is focusing on the Big Four firm’s role in reporting to the Financial Services Authority on the bank’s compliance with the FSA’s client asset rules for the years ended 31 December 2007 to 2011.
The move follows the final notice issued by the Financial Conduct Authority (the FSA’s successor body) in September against Barclays and imposing a record £37.745m fine.
An FSA investigation had found failings in the bank’s investment banking division which provided safe custody services to its affiliates, eligible counterparties and professional clients in connection with its product offerings within the division. At risk were £16.5bn worth of clients’ custody assets.
The investigation identified 95 external accounts which were not adequately protected in accordance with the FSA’s rules. There were no records in the bank’s own sub-ledgers of the fact it held the assets and often no written agreement setting out the basis on which the assets were held.
It also found that there was inadequate consideration of whether it was appropriate to restrict a third-party sub-custodian’s right to claim a lien, right of sale or right of set off.
Had the bank become insolvent, the FSA concluded, the “significant weaknesses” in these systems and controls would have led to clients incurring extra costs, lengthy delays or even losing assets.
In a statement, PwC said, “We take our responsibilities very seriously and remain committed to delivering work to the highest professional standards. We will cooperate fully with the FRC in its enquiries.”
The investigation is understood to hinge on the interpretation of FSA rules on the documentation of the custody of client assets.
In December last year, the FRC closed a separate investigation into PwC’s role as auditor over the period 1 December 2001 to 29 December 2009, in relation to the preparation of reports for the FSA about Barclays Capital Securities’ compliance with the FSA’s client asset rules, which govern the protection of client money.
The investigation concluded that there was “no realistic prospect” a tribunal would make an adverse finding.
As well as today’s announcement about PwC and Barclays, the FRC said that it would be investigating PwC over its role as auditor to Tesco.