It is the most severe punishment imposed by the SFA since it was established as a regulator in 1991.
More than 200 investors are suing Greig Middleton for £8m over the Second Greig Middleton Enterprise Zone Trust (GMEZT-II), which went sour just nine months after its launch.
Last autumn Greig Middleton applied for a postponement of the SFA's ruling until after resolution of the litigation, but was turned down. The broker is itself taking legal action against third parties who supplied information on the setting up of the trust.
The broker, Mr Kemp-Gee and Mrs Valerie Marshall, a director of the corporate finance department, have jointly admitted four breaches of the SFA's rules. Mr Kemp-Gee has been reprimanded and fined £5,000 and Mrs Marshall has been severely reprimanded and fined £10,000.
A lawyer acting for the investors' action group, Anthony Gold of Eversheds Alexander Tatham, said; "This is tremendous news. It will be interesting if Greig Middleton's attitude to litigation changes as a result of the SFA's action."
But Brian Tora, the broker's marketing director, said the SFA's ruling would not damage Mr Kemp-Gee's standing or its determination to fight the lawsuit.
"Obviously we're disappointed. This was four years ago, and we have since withdrawn from sponsoring enterprise zone trusts. They are unregulated tax shelters which carry implicitly a higher degree of risk. There were problems with Docklands, which was very badly hit by the collapse of Canary Wharf. But we will fight the lawsuit vigorously."
The problem started in 1991 when Greig Middleton raised £10.7m to buy a Docklands office block. Nine months after GMEZT-II bought the block its tenants, the architecture firm Seifert Group, went into receivership.
The trust therefore lost the rental income the tenant would have paid, and the receivers, Ernst & Young, are still trying to let the building four years later.
The SFA, headed by Christopher Sharples, received agreement from the broker, Mr Kemp-Gee and Mrs Marshall that they had breached SIB Principle 2 in four respects:
o Failing to instruct any external accountants with regard to GMEZT-II;
o Seeking to work to an unrealistically short timetable for the formation of the trust;
o Placing too much reliance upon - and failing sufficiently to investigate - representations by the tenant.
In its statement to the SFA, Greig Middleton concluded that "incorrect, incomplete and exaggerated statements were made" by third parties about the tenant and its parent company, and about negotiations for the sub- letting of the property.
Launching the trust in March 1991, Greig Middleton said it was "a unique opportunity ... to acquire an office property with an assured rental stream from a top quality tenant with good prospects for growth".
The brochure added that this was "a scheme devised ... to offer a low risk investment ... which is capable in the medium term of being sold to institutional investors".
Last year the City finance house King & Shaxson bought Greig Middleton. The new owner is completely ringfenced from the litigation, which is contested by the previous share- holders, mostly Greig Middleton employees.