FSA Fines Stockbroker For Poor Sales Practices

by Jason Gorringe, Tax-News.com, London

03 April 2008

The Financial Services Authority (FSA) has fined Mansion House Securities Limited GBP122,500 for giving customers unsuitable and inaccurate advice when selling higher risk shares.

The FSA revealed that it had reviewed 30 recommendations relating to higher risk shares, made by Mansion House between May 2006 and January 2007.

During its review, the FSA found that Mansion House's advisers had given customers inaccurate information, and had failed to highlight the risks associated with the recommended shares. Its advisers also used inappropriate sales practices to pressure customers into buying shares.

The review additionally showed that Mansion House had not set up adequate compliance procedures or ensured that its staff were properly trained. Furthermore, Mansion House had not disclosed the commission and charges it received in relation to the shares.

Margaret Cole, FSA Director of Enforcement, observed that:

"Customers expect their stockbrokers to give them clear information, make suitable recommendations and not use unacceptable sales practices. In failing to do this, Mansion House treated its customers unfairly."

"This is our third recent fine against a stockbroker for treating customers unfairly and should be a warning to others that we will not hesitate to take action where it is necessary to protect consumers," she added.

Mansion House's failings came to light as a result of ongoing visits by the FSA to assess the practices of small firms when selling higher risk shares.

Mansion House is appointing a skilled person to assess its systems and sales practices, and to determine any appropriate compensation for customers. The firms also agreed to settle at an early stage of the investigation, otherwise the fine would have been GBP175,000.

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