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FCA bans and fines stockbroker £450k for misselling

The FCA has banned the former chief executive of stockbroking firm Gracechurch Investments and fined him £450,000.

Kenny led Gracechurch, which is now dissolved, when it routinely missold small-capitalised stocks through pressure tactics, misrepresentation and unsuitable advice.

The FSA decided to take enforcement action against Kenny in 2012, but he referred the decision to the Upper Tribunal.

The tribunal recently struck out the appeal after he failed to provide a witness statement, allowing the FCA to issue its final notice.

Between April 2008 and November 2009, Gracechurch advised approximately 340 clients to buy £4m of shares in small-capitalised companies, which were not listed on the main market.

A sample review of calls showed that brokers persistently ignored refusals by clients to buy stock, repeatedly made calls to particular clients until they were persuaded, ignored clients’ protests that they did not have any funds to invest and ignored or brushed off client requests for information in relation to the stocks.

A sample review of documents used by Gracechurch’s brokers found that documents concerning four out of nine stocks contained material misrepresentations of the financial position of the stock.

The regulator says Kenny personally used pressure selling techniques on customers.

He also withheld a non-compliant sales call recording that the regulator had requested, caused Gracechurch’s lawyers to provide false dates of meetings, and misled the regulator about how the firm handled a conflict of interest with its clients.

FCA acting director of enforcement and market oversight Georgina Philippou says: “As chief executive of Gracechurch, Kenny was involved in serious, repeated and at times deliberate misconduct. On a number of occasions this amounted to dishonesty.

“Kenny’s behaviour impacted the customers of Gracechurch, who were pressured into buying risky stocks.
 
“This significant fine and ban sends a strong message to those who run financial services firms, that they will be made to answer for misconduct and that we will take particularly seriously attempts to cover up misconduct by trying to mislead us with false information.”

In December 2012, the FCA publicly censured Gracechurch and banned former compliance officer Carl Davey from holding a position in the financial services industry.

It would have fined Davey £175,000 had it not been for the serious financial hardship the fine would have caused him, and would have fined Gracechurch £1.5m had the firms not been in insolvent liquidation and had no assets.

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