The FSA has varied the permissions of national stockbroker Pritchard for failing to adequately protect client money.
The company failed to arrange adequate protection for clients' assets when it was responsible for them, and allowed client money to be used on its own account and not that of clients, the regulator said.
Pritchard, based in Dorset, has been told it can no longer carry out any of the regulated activities listed in its Part IV permissions, except to close out transactions which have already commenced.
It has also been told that it cannot release any of the assets in its account, or any assets belonging to its customers but held by the firm to its order, without written consent from the FSA.
Merchant Capital, a wholly-owned subsidiary of Merchant House Group (MHG), is a client of Pritchard, which holds all client monies of its structured product division in segregated client money bank accounts.
It said MHG is in the process of making arrangements for the handling of client monies with alternative providers.
It added the board of MHG does not believe the group or any of its clients will suffer economic loss as a result of the FSA's action.
Pritchard has 28 days from the issuing of the notice to refer the matter to the Upper Tribunal and can also make written or oral submissions to the FSA.
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