Shares in Rathbones Group PLC (LSE:RAT, OTC:RTBBF) tumbled 16.5% to 1,630p on Tuesday after the wealth manager flagged a regulatory review that found shortcomings in its UK business and will trigger £60 million of costs.
The group commissioned a skilled person review, an independent assessment overseen by the Financial Conduct Authority, after engagement with the regulator.
It identified areas for improvement in how the UK wealth arm has implemented Consumer Duty, the FCA rules requiring firms to deliver good outcomes for retail clients.
The review also flagged weaknesses in aspects of the group's compliance, oversight and assurance arrangements.
Rathbones will run a two-year programme to address the recommendations, alongside a targeted review of some clients to check they received good outcomes.
The firm has paused, for up to twelve months, the onboarding of new clients requiring enhanced due diligence while it overhauls procedures and controls.
Such clients generated gross inflows of about £370 million over the past year.
It has also halted some inflows into general investment accounts from existing higher-risk clients, affecting roughly 4,700 people, or 4% of its 119,000 clients.
Those accounts brought in about £530 million in gross inflows over the same period.
The £60 million in expected costs, net of insurance recoveries, will be booked as non-underlying expenses over two years.
Rathbones will also stop charging management fees on cash held in clients' discretionary portfolios from 1 July, cutting underlying pre-tax profit by about £9 million in 2026.
The dividend policy is unchanged, and a £20 million share buyback, now approved by the Prudential Regulation Authority, will begin shortly.
Chief executive Jonathan Sorrell said the work would support the firm's ambition to be the best UK wealth manager and that its strategy remained unchanged.
