Some 23% of Ashcourt Rowan portfolios reviewed by the regulator showed a 'high risk of unsuitability', the Financial Services Authority (FSA) said.
The firm, which is headed up by Jonathan Polin (pictured), made a slight £0.9 million loss over the six months ended 30 September after tax, exceptional and non-continuing items were taken into account. It told investors about the FSA penalty as it reported to the market.
Following on from this morning's announcement, the FSA said it had looked at a sample of portfolios constructed by Savoy Investment Management, the high net worth business which now sits under the Ashcourt Rowan banner.
'Savoy allowed its managers a high degree of discretion to advise its wealth management clients in their investment portfolios. It had limited front office controls and its other processes failed to ensure the suitability of its advice and portfolio management,' the FSA said.
'As a result of these failings, a review of a sample of files found that 23% showed a high risk of unsuitability. Files often lacked information on clients' personal and financial circumstances and contained out of date and inadequate client information,' the regulator continued.
'This meant there was a high risk that investment managers were making investment decisions that did not match clients' expectations and their attitude to risk.'
Informing investors about the penalty, Ashcout Rowan's chairman Kenneth West explained it related to 'a number of legacy issues' in Savoy, and that these have been addressed.
'This is clearly a significant fine but we have chosen to accept the FSA's findings and agree an early settlement to enable the business to move forward,' West said.
He added: 'In the past our processes and systems were not as robust as they should have been and this has been a key focus of the change management programme over the past year.
'It is absolutely right that we should resolve legacy issues like these ones whilst aiming to build best in class administration and compliance systems for the future.'