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Another stockbroker fined by FSA

The FSA has fined Glasgow-based stock broking firm Direct Sharedeal Limited £101,500 after its appointed representative, First Colonial Investments, used misleading sales pitches which failed to set out the inherent risks of buying penny shares.

The FSA says DSL, which specialises in spread betting and share dealing, provided an avenue for FCI to carry out penny share sales and should have made sure that FCI was providing customers with accurate and sufficient advice to make informed decisions about whether to invest in penny shares.  

But, an FSA investigation found FCI’s sales showed “scant regard” for their customers. The regulator says potentially misleading sales pitches were used to persuade people to buy shares, regardless of whether those shares were suitable.

FCI failed to mention the risks associated with their recommendations, and made misleading statements about the companies they were advising people to invest in.

FCI also placed its customers’ money at risk by holding it in a connected, but unregulated, firm. As a result, DSL was fined £101,500 for failing to monitor FCI’s customer treatment, along with that of other former appointed representatives.  

Director of enforcement Margaret Cole (pictured) says: “It is totally unacceptable for customers to be given misleading information, particularly when it relates to the risks of investing in penny shares. This applies whether that misleading information is given by an FSA authorised firm or by its appointed representatives.

“The small cap stock broking sector has been under increased vigilance by the FSA because of a need to drive up standards of customer treatment in this sector.

“This fine should serve as a warning to firms with similar business models that they need to be vigilant about what is going on at their appointed representatives – the responsibility lies with the authorised firm.”

DSL agreed to settle at an early stage of the FSA’s investigation. Had this not been the case, the financial penalty would have been £145,000. DSL has also agreed to contact FCI’s clients and provide redress where appropriate.

DSL has voluntarily varied its regulatory permissions, meaning that it can no longer take on new appointed representatives.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. How long before we have to pay another levy for this one then??

  2. Elizabeth D'Costa 18th February 2010 at 10:49 am

    It the FSA/FOS quangos who need to drive up standards……

  3. That’s what they’re trying to do with RDR!!

  4. As I am still a regulated person and will be gaurded in what I say. However Wills employed a top four consultancy firm at its OWN instigation and reviewed the 19 calls and concluded that they believed that based on the evidence relied upon by the FSA that they did not believe it had missold it also stated Wills were in their opinion NOT a risk to consumers. THEN the next day after alleged criminal activity in First Colonial Share deal get a £100k fine. Margaret COLE I say to you meet me and lets have a meaningful discussion about a crucial area of investment for private clients and small company’s starved of investment now after FSA action !

  5. It still baffles me that advisers, quite rightly, require specific qualifications to do a mortgage or equity release yet can build an investment portfolio for a client with the minimum FPC qualifications???

  6. But still no investigations into the selling practices of the banks, let alone any regulatory action in the wake thereof.

    It seems that the FSA, in an attempt to show its teeth and to be seen at last actually to be doing some regulation, is concentrating first on every type of regulated organisation under the sun other than the banks.

    Although the enforcement action now being dished out left, right and centre is probably justified, one has to wonder why those organisations with an established and widely publicised track record of activities which have led and on a daily basis are still leading to massive consumer detriment are not being given top rather than what appreas to be bottom priority.

    It’s all a bit fishy, isn’t it? Still, we wait with interest to see what happens when the FSA has finally run out of alternative organisations to target.

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