A STOCKBROKER which went into administration has been publicly censured and would have been fined £4.9m if it were still in business.

The Financial Conduct Authority (FCA) decided to waive the fine on Bournemouth-based Pritchard Stockbrokers Ltd so that any assets could be made available to creditors.

But it found the company had “recklessly” failed to protect its clients’ funds and lost around £3m of client money.

The stockbroker and wealth management company had more than 11,000 customers during the period in question and was responsible for managing more than £26m for customers.

But it was not providing adequate protection for client funds and had used client money for business expenses, the FCA found.

The authority said Pritchard routinely failed to pay enough money into its client bank account to cover shortfalls in client money. It also failed to tell the FCA.

It even provided an assurance to the FCA in 2010 that it was “confident” it was complying with its obligations on client money.

Its failures resulted in the Financial Services Compensation Scheme having to compensate clients.

Pritchard was incorporated in 1986 and had been authorised to carry on designated investment business in 2001. It had a head office in Bournemouth and 10 ancillary offices.

But it ran into financial problems in 2009 and used client money to meet business expenses.

The amount by which it failed to meet daily shortfalls in client accounts ranged from £198,000 to £2.6m.

Managing director David Gillespie and finance director David Welsby claimed the company had an offshore facility offering £2m to support its client money position.

But no “credible evidence” had been produced for the existence of the offshore facility and such arrangements did not comply with the rules, the FCA said.

The FCA seized Pritchard’s assets in February 2012 and the company entered special administration the following month.

Issuing a public censure, the authority said: “Pritchard recklessly relied upon the existence of an undocumented and opaque offshore facility in attempting to correct a deficit which it had wrongfully brought about in its client money position.

“Its failure adequately to protect its client money throughout the relevant period contributed to a loss of approximately £3m of client money by the time Pritchard entered into special administration.”