The FSA has publicly censured stockbroking firm Gracechurch Investments for using high-pressures sales tactics leading to client losses of at least £2m.
The regulator is looking to ban and fine former Gracechurch chief executive Sam Kenny £450,000 after clients were pressured to invest in the shares of small companies. Kenny has referred the case to the Upper Tribunal.
The FSA says it would have fined Gracechurch £1.5m had the firm not been in liquidation. Former Gracechurch compliance officer Carl Davey has been banned from working in the financial services industry.
The FSA says Gracechurch clients were pressured into investing in risky company shares listed on the Aim and Plus markets, as well as unlisted shares.
It says the company’s brokers misrepresented the shares’ performance, ignored requests for further information and protests the clients had no funds to invest. It cites one case where a broker claimed a recommendation was based on inside information.
Between 1 April, 2008 and 4 November, 2009, Gracechurch advised approximately 340 clients to buy about £4m of small company stocks.
The FSA says Gracechurch provided it with false dates for internal committee meetings and deliberately withheld a recording of a non-compliant advised sales call requested by the regulator.
The FSA also says Gracehurch knowingly employed someone in a senior position who was not approved by the FSA and who was linked to pressure-selling tactics.
FSA director of enforcement and financial crime Tracey McDermott says: “High pressure sales tactics and systematic misrepresentation to clients are wholly unacceptable practices.
“The FSA will not tolerate firms coercing clients into buying financial products or services that are not suitable for them. Senior management of stockbroking firms should be clear that the buck will stop with them.”