Square Mile Securities, a London-based stockbroker, has been hit with a £250,000 fine from the City watchdog for using "high pressure sales tactics" on its customers and encouraging them to invest in shares "based on information that was inaccurate, incomplete and misleading".
The Financial Services Authority said a review of 55 transactions between March and May 2006 revealed that advisers at the firm "sometimes failed to get a customer's consent before selling them high risk shares". The tactics left some investors saddled with unwanted debt, including an 89-year-old customer whose account was charged at least £75,000 for five transactions entered without his sanction, breaching an agreed risk capital limit of only £25,000.
According to the FSA, unauthorised transactions were recorded by the completion of a trade ticket in the name of the customer. A final notice sent out last week noted one adviser's allegation that "approximately one in every 10 trade tickets" was processed in this manner – a practice known internally as "writing up rubbish".
As an example of the firm's pressure tactics, the notice cited the case of one customer who, despite indicating a lack of funds, was contacted 13 times in a span of eight days. In another example, characteristic of 26 of the 55 transactions reviewed, a Square Mile adviser made baseless claims to a 78-year-old customer, telling him that the price of a certain security had "gone up 50 per cent in one month. It went from 3.5p to 6p... and within the next two to five years it may be about 40p or 50p". Nothing in the public domain indicated or anticipated such an increase.
Square Mile, which bills itself on its website as "one of the top private-client brokers in the City of London", said that it acknowledged the FSA's announcement and that it was "complying willingly and in full", adding that "a statement is being prepared with the FSA that will be issued shortly".Reuse content