The FSA has fined a London stock broking firm and senior director £235,000 for putting customers at risk of agressive sales tactics in penny share dealings.
It ruled senior director Meenaz Mehta knew advisers' hard-line sales tactics at broking firm Hythe Securities Limited could pose a risk to customers, who were in danger of receiving unsuitable advice because the firm's controls were too weak to manage such an aggressive sales culture.
Hythe was fined £200,000, and Mehta received a £35,000 fine and was banned from holding senior positions in any firm selling penny shares to the public.
The FSA Handbook defines a ‘penny share' as a readily realisable security in which the bid-offer spread is 10% or more of the offer price, but not a government and public security, a share in a FTSE 100 company, or a security issued by a company which has a market capitalisation of £100m or more.
In September 2009, the FSA acted against a number of penny shares dealers after finding older people were being targeted by high pressure sales tactics.
At Hythe, Mehta was acting chief executive and controlled function 10 compliance oversight head, including of the Retail Group sales division which specialised in selling small cap or penny shares.
The Retail Group employed poorly trained advisers, paid them largely by commission, and pressurised them to meet sales targets or face disciplinary action, the FSA found.
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.
FSA enforcement and financial crime director 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."
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