SFA closes City broker

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The Independent Online
BRANSTON & Gothard, a stockbroker with several thousand private clients, has stopped dealing following intervention by the Securities and Futures Authority (SFA), the City watchdog. The SFA said the broker had insufficient capital backing, and, as such, "posed a serious risk to the market and the investing public".

Branston & Gothard said yesterday evening it was closing down customer positions under the supervision of the SFA. It added: "It is hoped that this will allow the firm to wind down in an orderly way."

The announcement potentially puts the funds of around 8,000 private clients at risk, although a SFA spokesperson said preliminary indications were that the broker should have sufficient funds to meet all its client obligations.

If there were a shortfall in the company's resources, clients could make a claim under the investors' compensation scheme, the SFA spokesperson said. But there is no cast-iron guarantee the scheme will cover every Branston & Gothard client.

The closure of the broker would jeopardise more than 100 jobs, including that of Jimmy Herbert, who, at 87, is the City's oldest working broker.

A SFA spokesperson said the watchdog had been aware of Branston & Gothard's inadequate capital resources "for a number of weeks". He added that, in this type of situation, the watchdog "works with the firm" to try to arrive at some mutually acceptable solution.

In this particular case, the SFA gave the broking firm until 6 April to inject more capital into the business. The firm's large shareholders are understood to have rejected the management's plea for a pounds 2m injection, following which the SFA formally intervened and instructed the company to cease all investment business.

The SFA monitors firms in all organised City investment markets to ensure they have sufficient capital to cover short-term operating costs and takes action when this requirement does not appear to have been met.

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