On 18 February 2010, the FSA published the Final Notice it has issued to Direct Sharedeal Limited (DSL), fining it £101,500 in relation to the activities of its appointed representative, First Colonial Investments LLP (FCI), which put DSL in breach of Principles 3, 6 and 10 of the FSA’s Principles for Businesses. The FSA found that, between 29 October 2007 and 31 March 2009:

FCI used unacceptable sales practices when selling higher risk securities to its retail clients, including failing to establish the suitability of the securities recommended and using potentially misleading sales pitches.

DSL put FCI’s client monies at serious risk by permitting FCI to hold client money in its own account and being unaware (until March 2009) that FCI was also using a bank account in another unregulated entity to hold client money.

DSL failed in its obligations as a principal to carry out appropriate due diligence before appointing FCI as an appointed representative and to supervise and monitor the activities of FCI once appointed.

DSL qualified for a 30% reduction in the penalty by settling at an early stage of the FSA’s investigation, without which the fine would have been £145,000.

Commenting on this Final Notice, Margaret Cole, FSA Director of Enforcement and Financial Crime, said: “The small cap stock broking sector has been under increased vigilance by the FSA because of a need to drive up standards of customer treatment in this sector. This fine should serve as a warning to firms with similar business models that they need to be vigilant about what is going on at their appointed representatives – the responsibility lies with the authorised firm.”

This enforcement action is one in a series currently undertaken by the FSA to raise standards of customer treatment in the small cap stockbroking sector.
On 1 February 2010, the FSA censured Falcon Securities (UK) Limited for the actions of an appointed representative and,
on 17 February 2010, the FSA censured another stockbroker for persistent failings in its sales practices.

read more

http://www.fsa.gov.uk/pubs/final/direct_sharedeal.pdf

http://www.fsa.gov.uk/pages/Library/Communication/PR/2010/031.shtml