SIB warns on newspaper share offers

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NEWSPAPERS that offer share-dealing services may be breaking the law, according to the Securities and Investments Board.

A number of papers, including the Guardian, Express, Mail on Sunday, Sun, Telegraph and Today, have offered their readers share-dealing services by linking with stockbrokers.

These newspapers have published coupons telling readers that they can sell their shares for a minimum commission of, say, pounds 10. This is far less than most stockbrokers charge and the papers' services have proved popular.

SIB, the City's chief non-banking regulator, believes some of these papers may have breached the Financial Services Act 1986, which requires anyone 'arranging' share deals to be authorised by a regulatory body.

It has written to both the Securities and Futures Authority, which regulates stockbrokers, and some of the brokers involved, setting out its concerns about branding and commission-sharing. The SFA has also contacted some of the brokers involved.

Most of the newspapers have branded their service - for example, The Mail on Sunday Share Service. They usually receive a share of the commission, perhaps pounds 1.50 out of pounds 10.

Newspapers are exempt from the Financial Services Act's general requirements when they give investment advice. This means they do not have be authorised under the Act to give recommendations on which shares to sell or life policies to buy.

But the exemption does not cover arranging deals, according to SIB.

Its concerns also apply to other areas of investment activity. It recently warned that housebuilders who guide prospective buyers to a source of mortgage funds should make sure of their position under the Act. If the deals breach the Act they could be unenforceable, and investors might not be covered by the compensation scheme if the broking firm collapses.

In the light of SIB's concerns, some papers have recently changed their coupons, making the paper's involvement appear less prominent. It is understood that some have switched, or are planning to switch, from commission-sharing to flat-rate fees.

They may be able to satisfy SIB's requirements by becoming appointed representatives of the broker, or by becoming authorised under the Act if they have not done so already.

Firms that have offered share-dealing services through newspapers include Killik, Hambro Clearing, Pershing Securities, The Share Centre and ShareLink.

Killik says the payment it hands to the papers is 'per response advertising' rather than shared commission.

A number of those involved appealed for clarity last week. Some have contacted the Treasury, which is responsible for SIB. But a spokesman said last week that it was a question for SIB and refused to be drawn.

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