The Financial Regulator is preparing to crack down on asset management firms for the misuse of client funds and the failure to keep company money separate from customer money.

Regulatory officials are planning to ramp up the tempo and frequency of their supervisory and enforcement actions around asset managers, including spread betting firms and contracts-for-difference traders, to safeguard investors' money.

The move follows a settlement agreement announced last week between the Central Bank and The Endowment Policy Purchasing Company (Teppco), an IFG subsidiary, for failing to maintain adequate controls and accounting systems to keep track of customer money.

The company was fined €23,500 – an unusually high sum when compared to other settlements.

According to the agreement, Teppco did not properly segregate client funds from company funds in its records.

It also neglected to make daily account reconciliations and issue annual statements to clients.

No client money was lost from the regulatory breaches, the Central Bank confirmed.

Officials are understood to be concerned that investment firms involved in margin trading, which can expose clients and the company to large losses, are not properly maintaining client accounts or keeping them separate from proprietary trading accounts. These companies usually take out lines of credit with prime brokers to engage in margin trading and have to be able to cover exposures. Regulators fear that, without clear lines between accounts, client money could be illegitimately lost in a margin call.

Reconciliation of accounts is understood to be another concern. Officials will extend investigations to auditors as necessary, according to regulatory sources.

Commenting on client asset rules generally, a Central Bank spokesperson said: "Adherence to the Central Bank's client asset requirements is a fundamental obligation of the institutions we regulate. It is a significant accounting and internal control obligation designed to safeguard the assets of customers. The obligations are core to good corporate governance and must be supported by the operations and boards of institutions. Customers' faith in financial institutions is already shaken. Non-compliance is not only an enforceable matter but risks further eroding the trust customers assume when dealing with institutions."

Head of financial supervision Matthew Elderfield has promised to beef up scrutiny of financial activities that put customers' money at risk.