<
p>The FCA has imposed a ban and a fine on a broker after deeming he was not a fit and proper individual.
Broker, Sam Thomas Kenny, (IRN STK01013) was fined £450,000 for breaches incurred at the now-liquidated Gracechurch Investments Limited. Mr Kenny is now prohibited from performing any regulated activity.
Mr Kenny was approved by the regulator as a Director, Chief Executive and as a broker at the firm since 1st April 2008.
The firm, which advised around 340 clients with their investments in the shares of small companies and had a total of 35 approved brokers, went into liquidation on the 13th July 2010 after ceasing business in February earlier that year. Clients purchased around £4 million of small cap stock in the period.
The firm’s brokers were paid a low base salary of £15,000 pa with additional income achieved via commission, calculated almost exclusively to the volume of sales made.
The regulator discovered that the firm had regularly mis-sold small-cap stocks to its clients, giving misleading and unsuitable advice, where the firm gained commission from shares sold.
The regulator stated: “The Authority considers that, during the Relevant Period, Mr Kenny, in his controlled function roles, was personally responsible for numerous significant failings.”
Mr Kenny had imposed pressure on clients when advising them to buy small-cap stock, intentionally encouraged his staff to do the same, caused the firm’s lawyers to provide false dates of committee meetings to the FCA
It was also uncovered that Mr Kenny had told at least one broker at the firm that if a client stated that it had no money to buy stock, the broker should suggest selling other stock and reinvesting into the promoted stock.
A review conducted by the investigation team found that the firm’s brokers had on numerous occasions, ignored refusals from clients to buy stock and ignored requests for information regarding the stocks.
It was also found that brokers lied to at least one client about the amount other clients were investing.
According to the regulator, clients would have lost 72 per cent of what they had invested, where it considered that this caused at least £1.9 million in losses.
After the thematic visit from the FCA in May 2009, the firm hired a compliance consultant as a result of the feedback received. The consultant described one sale as “extremely pressured” as well as describing a broker in another sale as “hell bent on making a sale”, even after the client had stated he was “broke”.
The firm’s income dropped by 90 per cent after the consultant reviewed its ongoing advice and processes, which then led to its insolvency.
When the FCA was enquiring into the case, Mr Kenny even went to provide false statements, lied to the regulator about advice.
A Decision Notice was issued to Mr Kenny on the 11th October 2012, where he then referred the Notice to the Upper Tribunal on the 7th November that year. However, on the 7th January this year, his reference was struck out.
As a result of his conduct, the FCA issued a Final Notice on the 13th March 2015, concluding Mr Kenny is not a fit and proper person and should have all his controlled function approvals at the firm taken away, as well as imposing a £450,000 financial penalty upon him.
The FCA has imposed a ban and a fine on a broker after deeming he was not a fit and proper individual….
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