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The Financial Services Authority (FSA) has today fined Wills & Co Stockbrokers Limited (Wills & Co) £49,000 for failing to ensure that its customers understood the risks involved with penny shares, and for being unclear, unfair and misleading when advising on the shares.
The FSA reviewed 17 transactions carried out by Wills & Co between April and December 2006 and found that in all of them advice on penny shares had been given in a rushed manner without clear and/or prominent warnings about the higher risks involved. Consumers need to be aware that penny shares carry additional and higher risks making them more difficult to sell.
In addition Wills and Co did not make it clear, at the point of sale, that the penny shares were from its account and included a mark up which was to its benefit. It also did not disclose information about its charges in a way that was clear to customers or have in place adequate compliance arrangements to monitor its business. This was considered particularly serious as its business involved the sale of higher risk shares.
Margaret Cole, FSA Director of Enforcement, said:
"Firms have an obligation to tell their customers about the risks they face when buying any financial product. Wills & Co failed to do this so its customers were unable to make proper and informed investment decisions, which is an essential element in treating customers fairly.
"This fine should serve as a warning to other small firms who might be using these practices that they are not under our radar and the FSA will do all it can to ensure consumers are given suitable information and properly protected."
Wills & Co's failings did not come to light as a result of the firm's own systems and controls but were uncovered following FSA thematic visits to assess the practices of small firms when selling higher risk shares.
Wills & Co agreed to settle at an early stage of the FSA's investigation and therefore qualified for a 30% discount of the fine under the executive settlement procedures. Without the discount the fine would have been £70,000.
Background
- Wills & Co is based in London and Horsham, West Sussex.
- The full text of the Final Notice which includes the background to the case, the relevant statutory provisions, regulatory requirements contravened, and the factors taken into account when setting the level of the fine can be found on the FSA website.
- Since June 2006, the FSA has been conducting thematic work looking at the selling practices used by small firms when recommending higher risk shares. The on-going thematic work was carried out to ensure these firms were treating their customers fairly.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
- The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.
