Park Row must redress customers up to £7.8m for failing to ensure its sales were suitable, the FSA has announced.
The firm's former CEO, Peter Sprung, has been fined £49,000 and has agreed not to perform a significant function for five years.
The FSA says it identified serious failings at the national IFA network between January 2007 and January 2009.
Park Row has been publicly censured and will have to begin a customer redress exercise, which could cost between £5m and £7.8m. As Park Row is currently being wound-down, redress was secured with the support of its parent company, Royal Liver Assurance.
An FSA investigation found the firm failed to ensure its advisers properly documented the suitability of their recommendations and did not ensure they provided suitable advice to customers at all times.
Systems and controls were also found to be inadequate and Park Row consistently failed to rectify its sales processes despite numerous concerns raised by regulators.
The FSA highlighted pensions advice as a particular concern, with the firm's IFAs recommending products they were not authorised to advise on. The FSA was also concerned some advisers were selecting products based on the amount of commission they would receive.
Sprung has been personally fined because the FSA judged his conduct fell short of what it expected from a senior manager. He co-operated fully with the FSA at an early stage of the invesitgation, resulting in his fine being reduced from £70,000 to £49,000.
Margaret Cole, director of enforcement at the FSA, says: "As chief executive, Peter Sprung was responsible for ensuring that there were appropriate systems and controls at the firm and that it treated its customers fairly.
"He failed to do this despite being given the opportunity to do so on a number of occasions. As a result, he has been fined and can no longer work in a significant influence function for five years."
Royal Liver-owned Park Row shut to new business at 5pm on 13 November last year.
Three months earlier, Royal Liver, which paid £16.7m for the distribution business in 2003, announced it was "considering carefully" its future investment in the company after it posted a bigger-than-expected £2.17m loss for the first six months of 2009.
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