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Stockbroker firm and director fined £235,000

The FSA has fined Hythe Securities, a London-based stockbroker and its senior director, Meenaz Mehta a total of £235,000 after the firm’s “agressive sales culture” led to penny shares failings.

Mehta, who was chief executive of the firm, has also been 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 that despite recognising the potential risk to customers, Mehta failed to take sufficient action to ensure his firm was complying with FSA rules.

In the eight months to September 2007, the Retail Group completed 2,383 sales by telephone, but the one person responsible for monitoring calls only managed to check 35 of them.

Mehta’s failure to implement formal reporting procedures meant that he could not identify or control many of the regulatory risks arising from the firm’s business model, particularly those relating to the fair treatment and protection of Retail Group’s customers.

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.  

“Compliance with FSA rules is mandatory, and the buck will stop with senior management if a firm is found to be flouting those rules, whether by design or inaction.”  

Hythe was fined £200,000 for inadequate systems and controls.

Mehta failed to ensure that Hythe complied with the necessary regulatory requirements. He was fined £35,000 and banned from holding senior positions in firms selling penny shares to the public.  

The Retail Group is no longer operating at Hythe, and Hythe is no longer advising retail customers on the purchase of penny shares.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Aggressive sales ? Commission led performance targets ? Investment bonds ? Any chance they might look at the banks and building societies ?

  2. Richard Hammond 15th April 2010 at 12:11 pm

    A Grubby business model from what i understand. No surprises then to see that one of their other fsa listed brokers perviously worked at Square Mile Securities – Another company with a less then proud history.

  3. Eight months is approximately 32 weeks. 35 calls checked, equating to about 1 call a week.

    With an work efficiency rate like that, he should work at the FSA.

  4. This makes me laugh – I’ve worked for numerous Banks and ‘sell or face disciplinary’ was par for the course with them!! Why is the FSA playing blind to these practices???? Do they not want to upset the banks – the leaders of which regularly have lunch with them in London and goodness knows what else they do to influence them? Apalling. Time the FSA was scrapped or made to do its job properly.

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