The FSA has fined a firm and two individuals for failures in relation to the sale of Lehman-backed structured products between November 2007 and August 2008.
Dundee based law firm Thorntons Law LLP (Thorntons) has been fined £35,000 and partner Michael Royden also fined £10,500. Robert Peter Yarr, of Belfast-based IFA McClelland Yarr Financial Services, was fined £28,000.
The regulator says Thorntons gave unsuitable advice in relation to sales of Lehman-backed structured products. This included advising clients to invest when they could not afford to do so and recommending a high concentration of customers' savings and investment portfolios be placed in structured products. In one case, a client had 45% of his wealth invested in a product.
The firm also used misleading phrases in letter to customers, such as "absolutely no risk to capital", and failed to implement and maintain appropriate compliance monitoring.
Royden, says the FSA, had no financial services experience prior to taking responsibility for Thorntons Investment Services and failed to fully understand Lehman-backed structured products prior to the firm's insolvency. He also failed to put in place adequate systems and controls to collate management information about the Lehman-backed products.
Yarr, meanwhile, did not fully understand and warn customers of the counterparty risk associated with structured products. In addition, he failed to keep adequate records, conduct product research and ensure sufficient compliance oversight and management at the firm.
Royden and Yarr qualified for a 30% discount on their fines as they settled at an early stage.
The enforcement action follows an FSA review of the marketing and distribution of structured products, particularly those backed by Lehman Brothers, concluded in October 2009.
"Where we find evidence that firms are giving unsuitable advice to investors relating to complicated investments such as structured products we will not hesitate to take action," says FSA managing director of enforcement and financial crime Margaret Cole.
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