FBS will also pay compensation if any of its 30,000 UK clients have suffered losses as a result of five months of glitches caused by its new computer system. The SFA has given FBS until the end of January to correct its problems and will take "further steps" at that time if necessary. FBS will have to provide monthly progress reports to regulator.
The highly unusual move is further bad news for the City, which has been stunned in recent months by a series of scandals at highly reputable firms such as Morgan Grenfell Asset Management and Jardine Fleming.
The SFA said: "FBS has entered into undertakings with the SFA not to take on new direct customers or introduce new business services until SFA is satisfied with its customer service performance.
"The SFA will closely monitor the arrangements announced by the firm to ensure that customers who have suffered as a direct consequence of the operational problems are adequately compensated."
Phil West, marketing manager at FBS, said that 850 of its clients had complained about their accounts. But he conceded that, at times, all of the firm's clients would have been affected by the problems. "Where errors have been made we will pay compensation," he said.
Errors include delays with share dividend payments into accounts and the quarterly payment of income into self-select PEP accounts.
"In the early months there were problems with the timeliness of mailing statements to clients and there was some information on those statements which was not correct," Mr West said. He estimated thecompensation bill would be less than pounds 1,000 per client.
Most compensation will involve rectifying lost interest or reimbursing bank charges incurred from accounts going overdrawn as a result of delayed payments.
"We recognise that where clients have been severely inconvenienced and have experienced problems over a long time we would make a gesture of goodwill," Mr West said.
He calculated that most compensation payments would be tens of pounds, with a few running into the hundreds. Compensation will take the form of waiving fee income or one-off cash payments.
According to letters to Investors Chronicle, the trade magazine, FBS lost pounds 11,300 for one of its clients in Leicestershire as a result of three separate errors. Another complaint, dating back to May, was still not resolved at the start of October.
The embarrassing problems had already forced FBS to stop advertising for new business in August. The computer system was introduced in April and supplied by Synergo, a computer vendor. Mr West declined to say what, if any, action would be taken against Synergo but said the head of information technology at FBS had been given new responsibilities and that a replacement was being flown in from the US.
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