Share-tipping firm fined by watchdog

THE Financial Services Authority (FSA) has fined share-tipping company Hemscott Investment Analysis £50,000 for misleading customers about the performance of its share-tipping service and allowing two of its staff to tip shares in which they had an interest.

The FSA levied the penalty against the subsidiary of financial information provider Hemscott specifically for 'the production and distribution of misleading financial promotions', and for other breaches of its rules.

Nick Farker, company secretary at Hemscott and compliance officer for the subsidiary, said, 'We co-operated fully with the investigation, we have changed our procedures and tightened things up. We accept the FSA's judgement and have generally a very good relation with them.'

When asked if the two staff involved in the conflict of interest charge had been disciplined, Farker said, 'They are no longer with the company, though their departure was unrelated to the investigation.'

Besides failing to ensure that its financial promotions had complied with its own procedures, Hemscott was also found to have failed to put in place appropriate systems and controls for managing conflicts of interest, and to ensure that staff had received training and maintained their competence.

The regulator found that a promotion using the slogan 'We even make a bear market all soft & cuddly' had selectively quoted past stock recommendations by the firm, using only the best-performing tips rather than a cross-section, and so distorted the performance of the firm's service.

The Bear Market Promotion and other promotions issued by Hemscott also failed to mention that the past performance of the virtual share portfolio would not necessarily be repeated. And on two separate occasions, two of Hemscott's staff tipped shares 'in which they undertook personal transactions', the FSA said.

This promotion and another advertisements were published in financial magazines, and direct offer promotions were emailed to 198,000 subscribers to the website of the parent company, Hemscott.

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,' she added.'