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Wills & Co Stockbrokers

Declared in Default June 2010 – Max Compensation £50k

Wills & Co Stockbrokers Ltd Formerly Grahame H. Wills & Company Limited (WILLS) was one of the City’s oldest stockbroking firms. Set up in 1883 as the financial services division of the Wills tobacco business it fell foul of the Financial Services Authority (FSA) in October 2007. For breaches of the FSA’s Principles for Business in relation to advising and selling certain higher risk smaller capitalised securities to private customers, the FSA imposed a financial penalty of £49,000 on Wills. Wills agreed the facts and matters relied on with the FSA and agreed to settle the matter at an early stage of the proceedings and therefore qualified for 30% reduction in penalty. Were it not for this discount, the FSA would otherwise have sought to impose a financial penalty of £70,000.

The FSA visited Wills in May 2008 in order to establish, inter alia, whether it had rectified the failings identified in October 2007 and had implemented the remedial actions required. As part of the work during and following the visit, the FSA reviewed a sample of transactions conducted by Wills after 1 November 2007 and concluded that Wills had failed to take adequate and appropriate steps to address the issues previously identified. The FSA notified Wills that it had continued concerns with its selling practices and its failure to provide satisfactory evidence that adequate steps had been taken to strengthen systems and controls and change the selling practices.

In November 2008, Wills was referred to the Enforcement Division of the FSA. The investigators reviewed a further sample of transactions conducted by Wills between 17 January 2009 and 17 March 2009 and had serious concerns that, although Wills had improved its processes and procedures in some respects, it still continued to demonstrate the same or similar failures for which it was disciplined in October 2007. Concerns of varying degrees of seriousness were identified in all of the transactions reviewed.

On 4 December 2009 the FSA varied the permissions granted to Wills which resulted in Wills being unable to advise retail clients on the purchase of securities.

Wills did not take the FSA’s decisions lying down. It instructed a ‘top four’ consultancy firm – at a cost of approximately £1.5m - to review its compliance and sales practices. Controversially, Wills did not comply with the Financial Ombudsman Service (FOS) rulings and refused to release information under the Data Protection Act 1998. In the first half of 2010, the FOS had 387 investment complaints referred to it about Wills, finding 99% in favour of the consumer.

On 17 February 2010, the FSA censured Will for poor sales practices and not monitoring its advisers properly despite a fine and a previous requirement to take remedial action. The FSA also noted that Wills failed to handle its customer complaints properly. The FSA would have fined Wills £1,500,000 had it not been in the process of winding down its business and had a large amount of customer redress due.

Furthermore, the FSA issued statements of misconduct against Darren Lansdown, Wills sales director and Katharine Prichard, its compliance director. Both directors have signed undertakings not to hold senior management functions in the financial services industry for 3 and 5 years respectively.

On 25 March 2010, the FSA lodged a petition for the winding up of Wills in the High Court.

On 29 June 2010, the Financial Services Compensation Scheme (FSCS) declared Wills 'in default'. This means that Wills 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 Wills and redress eligible claimants. (Subject to its limits).

On 21 July 2010 the hearing for the winding up of Wills was adjourned as it was circulating a company voluntary arrangement (CVA) with its creditors. The CVA was approved on 20 August 2010, consequently the FSA withdrew its petition for the winding up of Wills.

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