St James's Place, the upmarket asset manager, was fined £250,000 by the City watchdog yesterday for not keeping proper records to show whether investment decisions taken on behalf of clients were clearly in their interest.
In the latest crackdown by the Financial Services Authority against companies and individuals in the Square Mile, the watchdog said it had found evidence of "serious monitoring and record keeping inadequacies" at St James's Place.
The fine will be split between three arms of the company - its UK business, its unit trust division and its international business. The company, which is majority owned by the high street bank HBOS, "exposed investors to the risk of surrendering existing investment contracts and committing money to new contracts in circumstances where this may not have been in their interests", the FSA said.
The regulator regards moving clients out of one investment and into another one, even if it has a very similar profile, as high risk. This is not necessarily because the risk profile of the investment has changed but because terminating one contract and starting a new one costs money.
The FSA insists that while swapping clients between different contracts can be a legitimate thing to do, investment managers must keep adequate records to justify their decisions.
Andrew Procter, the director of enforcement at the regulator, said: "It is essential that senior management take responsibility to ensure that procedures are in place to make sure that advisers are doing their job properly."
St James's Place, whose chief executive is Mike Wilson, expressed "regret" its record keeping had not been up to scratch. It said it had amended its procedures after carrying out a review.
Earlier this month, the FSA imposed a fine of £150,000 on Chris Goekjian, the former chief executive of Credit Suisse First Boston's derivatives subsidiary, who failed to prevent his team misleading the Japanese tax authorities.Reuse content