Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/new-model-adviser/article/a647073
FSA moves to ban broker for pressure selling that led to £2m loss
by William Robins on Dec 20, 2012 at 12:43
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.
News sponsored by:
Today's top headlines
Challenged by growing risk aversion?
Challenging financial markets over recent years have resulted in growing risk aversion among British savers and led many to seek safety in cash. Click here for more.
More about this article:
More from us
- Tribunal dismisses banned broker's claim of FSA bias
- FSA bans ex-mortgage broker boss over failure to combat fraud