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FSA moves to ban broker for pressure selling that led to £2m loss

by William Robins on Dec 20, 2012 at 12:43

FSA moves to ban broker for pressure selling that led to £2m loss

The Financial Services Authority (FSA) has censured defunct broker Gracechurch Investments for misconduct, including using pressure-selling tactics, resulting in client losses of at least £2 million.

The FSA said Gracechurch, now in liquidation, pressured customers to invest in shares of small companies resulting in multi-million pound losses. It said it would have fined the firm £1.5 million were it not in liquidation.

However the FSA is planning to fine former chief executive Sam Kenny £450,000 and prohibit him from working in financial services.

Kenny has referred the matter to the Upper Tribunal which will determine whether to uphold the FSA’s decision.

The FSA said Kenny personally pressurised clients, misrepresenting material facts, and in his role as chief executive trained and encouraged staff to pressure clients.

The FSA said Gracechurch’s brokers used pressure sales tactics to coerce clients to invest in risky small company stocks, listed on AIM and Plus or not listed at all.

It added the firm misrepresented the financial performance of stocks and brokers ignored requests for further information and protests that clients had no funds to invest. In at least one case a broker claimed that the recommendation was based on inside information, the FSA said. 

Between 1 April 2008 and 4 November 2009, Gracechurch advised around 340 clients to buy about £4 million of small company stocks.  Clients would have lost 72% of the their investments in eight of the top 10 stocks sold by the firm if they had held the stocks until 12 October 2011. 

The FSA said the firm also provided the FSA with false dates for internal committee meetings and withheld a recording of a non-compliant advised sales call it requested. 

The firm also knowingly employed someone in a senior position who was not approved by the FSA and who was linked to pressure-selling tactics, it said.

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2 comments so far. Why not have your say?

Steve Hayes

Dec 20, 2012 at 13:59

quote

The FSA would have fined Davey £175,000 if it were not for the serious financial hardship such a fine would cause.

What about the hardship caused to all their poor customers?

When will the FSA get the point. Dodgy bankers and the rest really don't care too much if the firm goes bust as long as they keep their ill gotten bonuses etc. And now they know that if they can claim a fine would hurt, then they'll get away with it. So what exactly is the deterrent?

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Bob Donaldson

Dec 20, 2012 at 16:06

@Steve Hayes - At least they won't be allowed in the industry in the future but I totally agree with you and perhaps your remark is one that we should all bear in mind when giving advice. You can do a lot of good but if you get it wrong then in many cases the damage is irrepairable

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