The Financial Conduct Authority has imposed restrictions on wealth management firm London Stone Securities Limited due to serious concerns the firm was not delivering good client outcomes.
As part of the restrictions, the firm cannot undertake any regulated activity, charge any further fees to existing clients or take on new clients without our express permission.
The firm must also withdraw all financial promotions and keep assets in the business.
According to the regulator, London Stone Securities was “charging excessive fees, which do not appear to be justified, clearly relate to benefits for the firm’s clients or provide fair value”.
It said low value investment portfolios were particularly affected.
Charges were not communicated or agreed with all clients in advance which raised concerns the firm had not properly disclosed its service terms. Some of the firm’s client base also have had characteristics of vulnerability.
The FCA was also concerned London Stone Securities issued financial promotions which did not follow its rules that appear to have directly targeted potential clients who were elderly, disabled and vulnerable.
It also found inconsistencies in information the firm provided.
The FCA said: “In its response to our sector-wide wealth management data survey, it told us that the maximum charge applied to any individual client was 5 per cent of their portfolio value.
“However, we found fees far in excess of this. For example, some clients have paid fees exceeding 65 per cent of the value of their portfolio which significantly reduces the value of their investment.”
According to the regulator, the firm also transferred £1.3mn from its bank account throughout the FCA’s ongoing enquiries.
The FCA issued restrictions on the firm in April to protect consumers but said these 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.
