Chase de Vere hit with £165,000 fine

Chase De Vere, the independent financial adviser, yesterday had a £165,000 fine slapped on it by the City watchdog over marketing material which downplayed the risks of so-called precipice bonds.

The Financial Services Authority said it had clamped down on Chase de Vere after the company painted an overly optimistic picture about the stock market, with headings such as "The only way is up?" in a leaflet distributed with Telegraph newspaper titles earlier this year.

The company also wrote: "History tells us that the stock market always picks up after a slump." Such statements are frowned upon by the FSA because it does not believe historical performance is a guide to the future.

The advertisement was published to publicise high income bonds, which are linked to the stock market and are often leveraged so that customers can lose a lot of money if share prices fall.

Chase de Vere, which is owned by Bank of Ireland, contacted all 259 customers who responded to its promotion and alerted them to the FSA's concerns. It has agreed to hand back cash to anyone who wants to cancel their investment on the products, some of which start with a minimum investment of £10,000.

The FSA said Chase de Vere had ignored criticisms of its marketing material in the past, only mending its ways when the regulator decided to fine it.

Andrew Procter, the FSA's director of enforcement, said: "The FSA has made it clear time and time again that financial promotions must not mislead and that significant risk factors should be given due prominence."

The watchdog added that the financial penalty would have been "much higher" if the company had not co-operated with the investigation. Bank of Ireland's compliance department will now vet all Chase de Vere promotional material.

Lloyds TSB received the highest fine over precipice bonds, being ordered to hand over £1.9m in September for improperly selling the products to 22,500 customers.

The FSA announced earlier this year it would crack down on companies which issued misleading advertising material to consumers, and set up a dedicated team under Anna Bradley, head of consumer affairs, to monitor material.

Ms Bradley, who replaced Christine Farnish, was previously director of the National Consumer Council.

Separately, the FSA said it would ban firms from taking out insurance to pay regulatory fines to ensure they felt the full effect of any penalties.

The ban will come into force from 1 January, 2004.

"Insurance to pay FSA fines undermines their impact as an incentive to good conduct," FSA General Counsel Andrew Whittaker said.

"This move will improve the effectiveness of regulation by closing that loophole."