13th March 2015
The City regulator has banned and fined a stockbroker £450,000 for ‘routinely mis-selling’ shares in small companies.
Sam Kenny, the former chief executive of now dissolved stockbroking firm Gracechurch Investments, has been banned and fined by the Financial Conduct Authority (FCA) over a litany of failures. This includes revelations that Kenny ‘routinely mis-sold small-capitalised stocks, through pressure, misrepresentation and unsuitable advice’ and that Kenny himself used pressure-selling techniques.
While head of the stockbroking firm, Kenny also withheld non-compliant sales call recordings that the FCA had requested and deliberately caused Gracechurch’s lawyers to provide the FCA with false details of meeting of Gracechurch’s committee. It also misled the regulator about how the firm handled conflict of interest with clients.
Between April 2008 and November 2009, Gracechurch advised 340 clients to buy £4 million of shares in small-cap companies, which were not listed on the main market.
A review of broker calls showed they ‘persistently ignored’ refusals by several clients to buy stocks and repeatedly made calls to clients until they were persuaded, ignoring clients protests that they did not have money to invest and brushed off requests for more information.
Further to the calls, a review of documentation sent to clients promoting nine stocks showed that information on four of the nine stocks contained ‘material misrepresentations of the financial position of the stock’.
Georgina Philippou, acting director of enforcement and market oversight at the FCA, said: ‘As chief executive of Gracechurch, Kenny was involved in serious, repeated and at times deliberate misconduct.
‘On a number of occasions this amounted to dishonesty. Kenny’s behaviour impacts the customers of Gracechurch, who were pressured into buying risky stocks.’
In December 2012, the FCA censured Gracechurch and banned former compliance officer Carl Davey from holding a position in the financial services industry. The FCA would have fined him £175,000 had it not been for the serious financial hardship the fine would have caused him.
Gracechurch would also have been fined £1.5 million but the firm was insolvent and had no assets.