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Stockbroker fined over abusive sales practices

SCOTTISH stockbroker Direct Sharedeal has become caught up in the continuing crackdown on abusive sales practices by the Financial Services Authority.

The regulator yesterday fined the spread-betting specialist a total of 101,500 for misleading sales practices by its appointed representative, First Colonial Investments.

The FSA said First Colonial failed to set out the inherent risks of buying penny shares to customers, and placed their money at risk by putting it in a connected, but unregulated, firm.

A spokeswoman for the FSA said the offences related to the period from 29 October 2007 to 31 March 2009. The FSA launched its inquiry in July 2009, by which time London-based First Colonial had fallen into administration.

Margaret Cole, FSA director of enforcement, said Direct Sharedeal should have ensured First Colonial gave customers accurate and sufficient advice.

"It is totally unacceptable for customers to be given misleading information, particularly when it relates to the risks of investing in penny shares," she said. "This applies whether that misleading information is given by an FSA authorised firm or by its appointed representatives."

The FSA launched a crackdown on misleading sales practices by small-cap share brokers in September last year.

Direct Sharedeal agreed to settle at an early stage in the inquiry, avoiding a potential financial penalty of up to 145,000. The brokerage has also agreed to contact First Colonial's clients and provide redress where appropriate.

 
 
 

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