Rathbones shares plunge 16.5% after FCA review finds compliance failings

Rathbones Group PLC (LSE:RAT) shares tumbled 16.5% to 1,630 pence on Tuesday after the wealth manager disclosed an FCA-overseen review that found shortcomings in its UK wealth business, triggering 60 million pounds in remediation costs over two years.

"The review has identified areas for improvement within the group's UK Wealth Management business regarding the implementation and embedding of consumer duty, as well as certain aspects of its compliance, oversight and assurance arrangements," the company said in a statement.

The skilled person review, an independent assessment commissioned after engagement with the Financial Conduct Authority, will cost 60 million pounds net of expected insurance recoveries. Rathbones will book the expenses as non-underlying charges over the next two years. The company also said it will stop charging investment management fees on cash balances held within discretionary portfolios from July 1, reducing underlying pretax profit by about 9 million pounds in 2026.

The findings represent a significant regulatory setback for the 180-year-old wealth manager, which oversees about 119,000 clients. Rathbones has voluntarily halted new inflows from roughly 4,700 existing high-risk clients — about 4 percent of its client base — until they meet certain requirements. Those accounts generated about 530 million pounds in gross inflows over the past 12 months. The company also paused onboarding of new clients requiring enhanced due diligence for up to 12 months, a category that includes politically exposed persons and those from higher-risk jurisdictions. Enhanced-due-diligence clients contributed about 370 million pounds in gross inflows over the same period.

Rathbones reported underlying pretax profit of 238.1 million pounds for 2025, up 4.6 percent from the prior year, while statutory pretax profit rose 54 percent to 152.9 million pounds. The company said its dividend policy remains unchanged and that a 20 million pound share buyback program, approved by the Prudential Regulation Authority, will begin shortly. Chief Executive Jonathan Sorrell said the remediation program would support the firm's ambition to be the best UK wealth manager and that its strategy remained unchanged.

The 16.5 percent sell-off erased roughly 400 million pounds in market value, reflecting investor concern that the regulatory failings could lead to further penalties, client outflows, or reputational damage. The FCA's consumer duty rules, which took effect in July 2023, require firms to deliver good outcomes for retail clients, and the watchdog has signaled it will take enforcement action against noncompliant firms. Rathbones said it will conduct a targeted probe on a batch of clients to assess whether they received good outcomes, with the full remediation program expected to run over two years.

This article is for informational purposes only and does not constitute investment advice.