St James's Place has been fined £250,000 by the FSA for serious breaches of monitoring and record-keeping requirements relating to replacement business.
The action refers to recommendations to customers made by the firms' appointed representatives to surrender and replace existing investment contracts arranged by competing providers, a process referred to as a replacement sale.
The FSA says the failing exposed investors to the risk of surrendering and putting money into new contracts when it may not have been in their best interests.
It says the SJP procedures for monitoring these sales did not detect and stop serious record-keeping deficiencies, making it impossible to check whether the sales had been suitable without seeking further information.
SJP says its board carried out a review of its procedures as soon as it found out about the FSA's concerns in December 2001 and has made changes accordingly.
The FSA says that proceedings were taken by Lautro against SJP UK in 1994 for similar failings, with the importance of proper monitoring highlighted on several occasions.
SJP legal and research director Hugh Gladman: “We very much regret that previously our record-keeping for replacement business was not of the required standard. We also wish to emphasise that the fine does not relate in any way to the suitability of the advice provided by SJP representatives to their clients and that no clients were disadvantaged.”
FSA director of enforcement Andrew Procter says: “Firms must understand that procedures to monitor advisers, particularly where high-risk transactions are being recommended, are not a 'nice to have', they are a necessity. It is essential that senior management take responsibility to ensure procedures are in place to make sure advisers are doing their job properly.”