FSA fines Hemscott Investment Analysis Ltd £50,000

Amanda Jarvis

January 14, 2005

The FSA found that a promotion using the slogan “We even make a bear market all soft & cuddly” had completely by-passed Hemscott's approval procedures and selectively quoted past recommendations by the firm, using only the best performing recommendations rather than a cross section of all recommendations.  This provided a distorted picture of the firm's service.  

The fine relates to specific breaches of FSA rules and principles in relation to the firm's:
– failure to put in place appropriate procedures to confirm compliance of financial promotions, and the subsequent issuing of one financial promotion without confirmation of compliance;

– confirmation of the compliance of and the communication of misleading financial promotions;

– failure to put in place appropriate systems and controls for managing conflicts of interest; and

– failure to have appropriate arrangements in place to ensure that staff received training and maintained their competence.

The Bear Market Promotion and other promotions issued by Hemscott contained other deficiencies, including a failure to mention that the past performance of the firm's virtual share portfolio would not necessarily be repeated.  On two occasions Hemscott also failed to operate appropriate systems and controls which resulted in two of its staff tipping shares in which they undertook personal transactions.

Anna Bradley, Director of the FSA's Retail Themes Division, said:  “Firms must not cherry-pick the information that they include in their marketing material.  They must present a balanced picture so that potential customers can see the key risks of an investment, as set against benefits.

“The provision of clear and unambiguous 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.”

The defects were identified by the FSA's Financial Promotions and Monitoring Team.  The Bear Market promotion and another advertisement were published in financial periodicals, and direct offer promotions were emailed to 198,000 subscribers to the website of the parent company, Hemscott plc.

Anna Bradley said: “Financial promotion is a priority area for the FSA.  Anyone who sees financial advertisements they think are misleading should report them to the FSA either through the website or on the hotline on 0845 730 0168.”

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