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FSA/PN/002/2008
14 January 2008

The Financial Services Authority (FSA) has today fined Square Mile Securities Limited (Square Mile) £250,000 for persistently using high pressure sales tactics and misleading information to sell customers shares they did not want or could not afford.

The FSA reviewed 55 transactions carried out by Square Mile between March and May 2006, some involving older persons and inexperienced investors.

The FSA's review found that Square Mile had set up a high pressure sales business that disadvantaged customers and did not have appropriate controls. It also showed that Square Mile knew its advisers frequently used unacceptable sales tactics and sometimes failed to get a customer's consent before selling them high risk shares.

Furthermore, Square Mile made false statements, provided inaccurate and misleading information and failed to disclose important details and significant risks about the shares to its customers. The firm also made recommendations without first ensuring these were suitable for the customer.

Margaret Cole, FSA Director of Enforcement, said:

"High pressured sales practices are wholly unacceptable. Firms that use such sales tactics undermine the regulatory requirement to treat customers fairly. A firm's customers are entitled to rely on it to provide them with advice and information that is clear, accurate and not misleading.

"The FSA will not tolerate any regulated firm coercing customers into buying financial products or services they do not want or can't afford. We are currently reviewing how stockbroking firms conduct their business and will not hesitate to take action against any that falls short of the standards we expect. "

Square Mile's failings came to light as a result of ongoing visits by the FSA to assess the practices of small firms when selling higher risk shares.

Square Mile's failings warranted a fine of £1.5 million but this was reduced because of its financial circumstances and its agreement to settle at an early stage of the investigation. Square Mile has undertaken to pay for independent approval of its transactions and new account openings. The firm has made changes to its senior management and agreed to appoint a skilled person to assess its systems and sales practices, and what customer compensation would be appropriate.

Square Mile has agreed to send its customers a letter advising them of the FSA's findings which will include information on how they can make a complaint.

Notes for editors

1. The full text of the Final Notice issued by the FSA 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.
2. Square Mile is a stockbroking firm based in London and has customers from around the UK. The firm specialises in advising and dealing in shares that have been, or intend to be, admitted to trading on the Alternative Investment Market (AIM) and PLUS market. AIM and PLUS provide primary and secondary trading services for emerging or small capital companies.
3. This is the second fine from an ongoing FSA thematic project looking at the selling practices used by small firms when recommending higher risk shares. In October 2007, the FSA fined Wills and Co stockbrokers £49,000 for not ensuring its customers understood the risks associated with penny shares (see PN/2007/110). The work started in June 2006 and is being carried out to ensure that small firms are treating their customers fairly.
4. Consumers can find helpful tips and guidance, on the type of information to expect from firms when buying investments, on the FSA's website, Moneymadeclear.
5. 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.
6. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.