The FSA has fined its third small broker over selling high-risk shares since its crackdown began in June 2006.
The regulator has fined London-based stock broker Mansion House Securities £122,500 for giving customers unsuitable and inaccurate advice when selling the shares.
Mansion House, which specialises in shares that have not launched on any market, had failed to highlight the risks associated with the recommended shares to clients and used “inappropriate sales practices to pressure customers into buying shares”.
The broker had also failed to set up adequate compliance procedures and ensure it properly trained its staff. It then failed to disclose the commission and charges it received relating to the shares to the FSA.
Margaret Cole, director of enforcement at the FSA, says: "Customers expect their stockbrokers to give them clear information, make suitable recommendations and not use unacceptable sales practices. In failing to do this, Mansion House treated its customers unfairly.
"This is our third recent fine against a stockbroker for treating customers unfairly and should be a warning to others that we will not hesitate to take action where it is necessary to protect consumers."
A statement from Mansion House says: "The investigation arose out of a routine FSA visit in September 2006, five months after we started business and therefore at an early stage in our development.
"As soon as we learned of the FSA’s concerns, we engaged independent compliance consultants, who have reviewed and, where necessary, overhauled our controls and procedures. We believe these are now robust, and we are fully committed to treating our customers fairly. Any broker that fails to meet our internal high standards of professionalism and integrity faces disciplinary action."
Mansion House says it carried out its own customer survey in 2007, which showed 82% of clients rated the broker's customer service as either excellent or very good, with less than 1% rating it as poor.
Mansion House says: "We have cooperated fully with the regulators since we were established and we are committed to continuing to do so."
The fine follows ongoing FSA visits to assess the practices of small businesses when selling higher risk shares.
The FSA says Mansion House will appoint a skilled person to assess its systems and sales practices and determine any appropriate compensation for customers. The broker will also settle at an early stage of the investigation to avoid a £175,000 fine.
In January the FSA fined Square Mile Securities £250,000 for using high pressure sales tactics. Last October it fined Wills and Co. Stockbrokers £49,000 for failing to ensure its customers understood the risks associated with penny shares.
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