The UK Financial Conduct Authority announced sanctions against two former directors of Pritchard Stockbrokers Limited related to the firm’s mishandling of client assets. Pritchard was a UK-based firm designated by the FCA to carry on an investment business that was engaged in stock brokerage and wealth management businesses.
The two former directors were David Gillespie, the company’s former managing director, and David Welsby, the firm’s former finance director.
According to the FCA, Pritchard experienced financial problems since 2009. The FCA claimed that “[t]hese financial problems put pressure on Pritchard’s capital adequacy and client money positions and resulted in Pritchard using client money to meet business expenses.” FCA claimed that from July 1, 2010, through February 8, 2012, except for two days, Pritchard had significant shortfalls in client money. In response, Mr. Gillespie allegedly obtained an undocumented GBP 2 million (US $3.2 million) offshore facility to buttress the firm’s client money position. However, this offshore facility was impermissibly included as an available client money resource by Pritchard and Messrs. Gillespie and Welsby.
Because of concerns regarding Pritchard’s handling of client funds, the FCA began a process on February 10, 2012, to secure the firm’s assets and close out existing transactions. By March 2012, the firm had entered a “special administration”—somewhat analogous to a US bankruptcy proceeding.
To resolve this matter Mr. Gillespie and Mr. Welsby agreed to financial penalties of GBP 10,500 and GBP 14,000 (US $16,876 and US $22,500), respectively—reduced amounts in light of their “verifiable evidence of serious financial hardship”—and to be barred from ever being involved in an FCA-regulated activity. Pritchard would have been subject to a financial penalty of almost GBP 5 million (over US $8 million) said the FCA. However, the FCA determined that, given the financial situation of the firm, any funds should be made available to creditors and “decided not to impose a financial penalty upon it.”