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 Whistleblower A whistleblower is an individual who manages to provide information or activity within a private or public organization that is deemed illegal, unethical, or not correct. In many countries, including the United States, whistleblowers are protected by law and in some cases can even recoup rewards if their information leads to successful prosecution.In the context of the financial services industry, whistleblowers play a large role in oversight, helping unmask several episodes of illicit behavior A whistleblower is an individual who manages to provide information or activity within a private or public organization that is deemed illegal, unethical, or not correct. In many countries, including the United States, whistleblowers are protected by law and in some cases can even recoup rewards if their information leads to successful prosecution.In the context of the financial services industry, whistleblowers play a large role in oversight, helping unmask several episodes of illicit behavior Read this Term confidence as a reason to disclose ongoing probes.