The letter to chief executives was sent out by the FSA after it made a number of visits to insurance and investment companies and identified several failures, the details of which are in a report sent with the letter.

Failings discovered by the authority included: poor management oversight and control; incomplete or inaccurate records, accounts and reconciliations; lack of establishment of trust status for segregated accounts and unclear arrangements for the segregation and diversification of clients’ money.

Among the measures taken in response to these findings, the FSA said it has frozen the assets of one firm and referred two firms to enforcement.  

“The client asset rules are a key protection for consumers. 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,” said Sally Dewar, managing director of risk at the FSA.