Gracechurch was publicly censured by the FSA for misconduct including pressure selling. The firm’s clients lost at least £2m after they were coerced into buying small company stocks listed on AIM and PLUS or not listed at all.
Former Gracechurch chief executive Sam Kenny and former compliance officer Carl Davey has been prohibited from holding positions in the financial services industry.
Kenny was also fined £450,000 by the watchdog. He has referred the case to the Upper Tribunal where he and the FSA will be able to present their cases and a ruling will be made whether to uphold, vary or cancel the regulator’s decision.
The FSA added that it would have hit Gracechurch with a £1.5m fine, had the company not been in liquidation. Davy would have been fined £175,000 but the regulator thought such a fine would cause him “serious financial hardship”.
Tracey McDermott, director of enforcement and financial crime at the FSA, said: “High pressure sales tactics and systematic misrepresentation to clients are wholly unacceptable practices. The FSA will not tolerate firms coercing clients into buying financial products or services that aren’t suitable for them.”
Gracechurch’s brokers used pressure sales tactics when approaching clients about small cap stocks. It also misrepresented the financial performance of stocks both orally and in writing, ouverlooking requests for further information, ignored protests that clients had no funds to invest and, in one instance, claimed a recommendation was based on inside information.
The FSA said Kenny personally pressurised clients or misrepresented material facts to them. Furthermore, in his role as chief executive he trained and encouraged his staff to pressure clients.
Davy failed in his efforts to effectively monitor advised calls and was involved in the deliberate withholding of the non-compliant advised sales call requested by the FSA,the regulator added.
McDermott commented: “Senior management of stockbroking firms should be clear that the buck will stop with them.”
