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Mansion House Securities

Declared in Default November 2009 – Max Compensation £48k

Mansion House Securities Ltd (MHS) was fined by the Financial Services Authority (FSA) £122,500 on 31 March 2008 for breaches of the FSA Principles for Business and Conduct of Business Rules that occurred between 3 May 2006 and 18 January 2007. MHS agreed to settle at an early stage of the FSA’s investigation, thus qualifying for a 30% discount under the executive settlement procedures. Were it not for this discount the FSA would have imposed a financial penalty of £175,000. MHS was instructed to obtain on independent review of its current compliance with regulatory standards and also of its past business and to remediate customers where appropriate.

With effect from 3 April 2009, the FSA varied MHS’ permissions and barred it from doing anything that would reduce the value of its assets. This includes paying ‘unusual or significant amounts’ to employees or bosses or to anyone connected with them. MHS cannot lend more than a small sum to anyone and it is prohibited from engaging in any kind of financial reconstruction or reorganisation without the consent of the FSA.

However, the variation of permissions stopped MHS from taking on any new business which inevitably led to it being placed into administration on 30 April 2009.

In the three years it had been in business MHS had employed more than 50 staff. Many were former employees of other broking firms that had attracted the attention of watchdogs. These included the notorious Pacific Continental Securities (UK) Ltd, which allegedly cheated its customers out of tens of millions of pounds, if not more, and which the FSA says it would have fined £2 million, had it not gone bust.

Another firm where some MHS employees used to work is Square Mile Securities Ltd. In January 2008 it was fined £250,000 for using unacceptable sales tactics, making false statements and giving investors misleading information, all in a bid to sell high risk shares whether customers wanted them or not.

On 24 November 2009, the Financial Services Compensation Scheme (FSCS) declared MHS “in default”. This means that MHS is unable or unlikely to be able to meet its liabilities and as the UK statutory fund of last resort; the FSCS can step into the shoes of MHS and redress eligible claimants. (Subject to its limits).

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