PERSONAL FINANCE: Be Penny Wise Says City Regulator

The Birmingham Post (England), March 5, 2005 | Go to article overview

PERSONAL FINANCE: Be Penny Wise Says City Regulator


Byline: John Cranage

The City regulator has warned investors to beware of promotions by companies tipping so-called penny shares.

The warning came after the Financial Services Authority (FSA) fined Highbury Financial Services Ltd pounds 35,000 for misleading investors.

The Bury St Edmonds company was said to have included misleading information in a promotion entitled 'The 25 Shares Most Likely to Double in 2004' and to have lacked the systems and controls that would have prevented publication.

The FSA found that three promotions published in two national newspapers and one national magazine put customers at risk because they created an unrealistic expectation and were unbalanced.

They accentuated the benefits of investing in the penny shares recommended by Highbury without 'clear and fair mention of material risks in shares generally and penny shares in particular'.

Even worse, the promotions included false statements that the firm had received information from a 'panel of financial experts' and had received 'secret tip offs' when it had not.

Highbury was found not to have systems and controls in place to ensure that the compliance officer was appropriately supervised and that he was competent in approving financial promotions.

Anna Bradley, director of the FSA's retail themes division, said: 'All financial promotions must be clear fair and not misleading and firms must not make false statements in their marketing material.

'Potential customers must be able to discern the key risks of an investment, as well as its benefits'The provision of clear, fair and not misleading financial promotions is a key priority for the FSA. All firms, whether large or small, need to ensure they have appropriate systems and controls in place to meet FSA regulations. …

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