Allied Provincial Securities, the stockbroker, was ordered to pay pounds 135,000 in fines and costs yesterday after one of its senior staff diverted more than pounds 1m of a client's money into a firm where he was a director.
David Duncan was ordered by the Securities and Futures Authority to pay a personal fine of pounds 15,000, plus pounds 5,000 costs. He has also been barred for life from working as a stockbroker.
The fine on Allied Provincial, recently taken over by King & Shaxson, the financial services company, is one of the largest levied by the SFA, the stockbrokers' watchdog.
Bernard Solomons, deputy chairman of Greig Middleton, under whose name Allied Provincial now trades, said he had known Duncan for 30 years and could not believe what had happened. "We never had any complaints about David and would not have expected this of him. This is distressing and very bewildering," he said.
Duncan was responsible for managing a private client's portfolio from the firm's Glasgow office. He arranged for payments of more than pounds 1m to be made from her account to Fern Developments, a small biotechnical equipment company.
Although Duncan did tell his client about the investment, she was not aware of the risk involved or of the nature of the payment. Nor did he tell her that his wife was also an employee at Fern Developments.
The money, paid over a period of more than two years, was unsecured. Throughout this period the firm was in financial difficulty and was only kept afloat by the loans made to it. It eventually went into receivership in November 1993.
The SFA said Duncan had originally faced a fine of pounds 50,000 but this was reduced given his means. He is now believed to be out of work.
Its fine on Allied Provincial related to its failure to supervise Duncan's activities more tightly and to spot problems.
Mr Solomons said: "We accept that we could have operated better in terms of our compliance activities and we have tightened up in this area."
The client, for whom the "investment" in Fern composed 10 per cent of her portfolio, is now in talks with Allied Provincial's insurers, with a view to a total refund for her losses.
The SFA's fine on Allied Provincial follows a record one of pounds 200,000 in April on Greig Middleton itself, the King & Shaxson firm it is now a part of.Reuse content