Development investment firms that hold onto clients' money or assets have been warned about management and oversight failings.
Sources of finance held by investment firms on behalf of clients are not being managed appropriately, according to the Financial Services Authority (FSA).
The regulator has written a letter to insurance brokers and investment firms warning them of the failings unearthed in a series of visits to premises during 2009.
Shortcomings when holding
finance for business clients included unclear arrangements for segregation and diversification of clients' money and incomplete or inaccurate records and accounts.
Managing director of risk at the FSA Sally Dewar explained that client asset rules are a "key protection for consumers".
She said: "It is simply unacceptable that firms are not ensuring that consumers get the appropriate protection.
"We have pointed out our concerns to firms and will be following up these concerns with further visits this year."
It comes shortly after the FSA fined an insurance firm in Northern Ireland for failures which led to 16 fraudulent mortgage applications being submitted to lenders.
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