The Financial Conduct Authority (FCA) announced today (Wednesday) that it has imposed strict restrictions on wealth management firm London Stone Securities Limited. The company can no longer undertake any
regulated activities, charge additional fees to current clients, or accept new
clients without the regulator’s approval.
Excessive Fees and Lack of Transparency
The FCA imposed the restrictions after discovering that
London Stone Securities charged clients excessive fees that lacked
justification. These charges reportedly did not appear to benefit clients or
offer fair value, particularly impacting low-value investment portfolios.
The watchdog has also faulted the company for allegedly
failing to communicate or agree on these fees with all clients beforehand,
raising transparency issues. The situation was especially concerning given that
many of the firm’s clients were elderly, disabled, or otherwise vulnerable.
FCA found that London Stone Securities issued financial
promotions that did not comply with FCA rules. These promotions seemed to
specifically target potential clients who were elderly, disabled, or
vulnerable, compounding the firm’s misconduct. Furthermore, the firm provided
inconsistent information to the FCA.
While it reported a maximum fee of 5% of portfolio value,
some clients paid fees exceeding 65%, drastically diminishing their investment
values. The firm also raised the alarm by transferring £1.3 million from its
bank account during the FCA’s ongoing inquiries.
Protecting Consumers
In April, the FCA imposed initial restrictions to protect
consumers. After reviewing the firm’s representations, the regulator decided
that these restrictions should remain due to the potential consumer harm
involved. London Stone Securities has the right to challenge this decision and
refer the matter to the tribunal.
The FCA mentioned that its stringent actions reflect the seriousness of the
firm’s violations and its commitment to safeguarding consumer interests. By
maintaining these restrictions, the regulator seeks to prevent further harm and ensure
that all financial services firms operate with integrity and transparency.
In May, the FCA cited heightened interest from a
section of the UK’s legislators in specific cases as one of the reasons for
proposing disclosure of ongoing investigations. The watchdog said that it
receives about 650 letters of inquiry annually.
FCA was addressing concerns about the potential
negative impacts of the policy on firms and individuals named in
investigations, especially those later cleared. Among other reasons, the
regulator noted the effect on whistleblower confidence as a reason to disclose
ongoing probes.
This article was written by Jared Kirui at www.financemagnates.com.
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