The FSA has fined London stockbroker Hythe Securities and its senior director Meenaz Mehta a total of £235,000 after the firm’s “aggressive sales culture” led to penny share failings.
The firm was fined £200,000, and Mehta, who was chief executive, was fined £35,000 and banned from holding senior positions in any firm selling penny shares to the public.
The regulator says that under Hythe’s sales division, Retail Group, which specialised in selling small-cap and penny shares, the firm employed poorly trained advisers, paid them largely by commission and pressurised them to meet sales targets or face disciplinary action.
An FSA investigation found that customers were exposed to the risk of receiving unsuitable advice because the firm’s systems and controls were too weak to manage the risks generated by an aggressive sales culture. The regulator says despite recognising the potential risk to customers, Mehta failed to take sufficient action to ensure the firm was complying with FSA rules.
In the eight months to September 2007, the Retail Group completed 2,383 sales by phone but the one person responsible for monitoring calls only managed to check 35 of them.
FSA director of enforcement and financial crime Margaret Cole says: “Mehta’s lack of action and leadership allowed Hythe to place the pursuit of profit above the protection of its customers. This is totally unacceptable.”
The Retail Group is no longer operating at Hythe and Hythe is no longer advising retail customers on penny shares.