FSA Fines Broker For Unacceptable Sales Practices

by Robin Pilgrim, LawAndTax-News.com, London

18 August 2006

The UK's Financial Services Authority announced on Thursday that it has fined stockbrokers Hoodless Brennan Plc for using unacceptable sales practices, and for failing to treat its customers fairly when selling shares in a company called Knowledge Technology Solutions Plc (KTS) on 12 June and 25 July 2003.

The FSA found that the sales practices employed by Hoodless brokers when selling KTS shares to customers fell below both regulatory standards and the firm's own internal standards. The unacceptable sales practices included persuading customers to buy stock when they were not ready to do so, and persuading customers to take more stock than they appeared to want.

Brokers also used information about a contract between Hoodless and KTS that was not in the public domain as an inappropriate sales aid to persuade customers to buy KTS shares. They also provided customers with unsubstantiated personal opinions on the shares which were potentially misleading. Brokers had not been briefed about the contract and as a result were not in a position to comment on its relevance to the sale of KTS shares.

The FSA found that Hoodless had failed to deal appropriately with the issue of whether the information it held about the contract with KTS was in the public domain. It did not clarify the position with KTS, take professional advice internally or externally, or take adequate steps to brief brokers on whether they could mention the contract to customers.

Margaret Cole, Director of Enforcement at the FSA announced that:

"The fair treatment of customers must be part of corporate culture so that a firm treats its customers fairly on all occasions of its dealings.

"Brokers at Hoodless Brennan used unacceptable selling practices and did not pay enough attention to the interests or the information needs of their customers. Nor did they take time to communicate with their customers in a way which was clear, fair and not misleading. The FSA will not tolerate this method of selling shares to private customers."

Recommended