The UK Financial Conduct Authority (FCA) has imposed restrictions on wealth management firm, London Stone Securities Limited.
The firm cannot undertake any regulated activity, charge any further fees to existing clients or take on new clients without FCA’s express permission. The firm was also required to withdraw all financial promotions and keep assets in the business.
This follows serious concerns about London Stone Securities Limited not delivering good client outcomes. The firm was charging excessive fees, which do not appear to be justified, clearly relate to benefits for the firm’s clients or provide fair value. Low value investment portfolios were particularly affected.
In addition, charges were not communicated to or agreed with all clients in advance, raising concerns that the firm has not appropriately disclosed and explained its service terms. This risk was exacerbated as some of the firm’s client base have characteristics of vulnerability.
The FCA is also concerned London Stone Securities issued financial promotions which did not follow FCA’s rules that appear to have directly targeted potential clients who were elderly, disabled and vulnerable.
The regulator also found inconsistencies in information the firm provided to it. In its response to FCA’s sector-wide wealth management data survey, it told the regulator that the maximum charge applied to any individual client was 5% of their portfolio value. However, the FCA found fees far in excess of this. For example, some clients have paid fees exceeding 65% of the value of their portfolio which significantly reduces the value of their investment.
The firm also transferred £1.3 million from its bank account throughout the FCA’s ongoing enquiries.
The FCA issued restrictions on the firm in April to protect consumers. Having now considered representations from the firm, the regulator considers that the restrictions should remain in force due to the seriousness of the potential consumer harm the firm has caused. The firm has the right to challenge this and refer the matter to the tribunal.
