Pacific Continental Securities (PCS) is possibly the UK's most notorious firm of stockbrokers, dubbed Britain's riskiest broker. Its team of young salesmen used high-pressure tactics to entice small investors into buying worthless shares that for most were a guaranteed route to financial ruin.
On 13 February 2001 Pacific Continental Securities was incorporated as a stock broking firm that specialised in recommending and dealing in securities to clients for smaller or emerging companies that trade on the Alternative Investment Market (“AIM”).
The FSA first showed concern in 2002/2003 about an individual linked in press reports to boiler room operations. And about the level of involvement this person had in Pacific Continental Securities indeed, whether he was in fact a shadow director. PCS denied any involvement and indicated that he was only acting as consultant to the group; however a review of company emails showed the individual to be involved in some of the decisions of the firm including those that directly impacted customers.
In 2004 Pacific Continental Securities, courted bad press when MD Steven Griggs referred to a business relationship with Jeffrey Reade, a shadowy financier named as the man behind a boiler-room stock scam in New Zealand. Griggs also implied his office received remuneration from companies for marketing and the sale of their shares in addition to the 0.5% commission charged to clients.
The firm employed mainly young people, effectively barrow boys, as almost all were male, who thought they were City stockbrokers. Staff turnover was high and this resulted in the number of staff holding a controlling function varying from month to month. There was no formal training Pacific Continental Securities provided advisers with a manual containing details of what was expected in terms of sales tactics and a series of responses designed to overcome a customer’s objections to a sale. This manual was known by advisers as the “bible” and was relied upon in promoting the securities to customers.
Between 2004 and 2006 the Financial Services Authority issued a number of papers to Pacific Continental Securities setting out that it was required to improve its approach in the treatment of customers by focusing on management responsibility for the corporate strategy, culture and day-to-day operations.
By May 2006, Financial Ombudsman Service records indicate that Pacific Continental Securities was the most complained about firm of security brokers on their books. The majority of the complaints related to the purchase of shares in high risk US companies that did not meet American investor protection standards, but can legally be sold to non-Americans. Although outside the scope of the current action, the issues raised were frequently based on the firm’s sales practices.
In May 2007, the Financial Services Authority became concerned as a result of the continued rising level of customer complaints that were referred to the FSO about Pacific Continental Securities and whether the firm was able to remain capitalised.
The following June the City watchdog, the FSA banned Pacific Continental Securities from taking on any new business except where necessary to close and settle existing client positions. On 20 June 2007 Pacific Continental Securities ceased trading and went into administration.
In March 2008, Pacific Continental Securities moved from being in administration to being in Creditor’s Voluntary Liquidation.
In December 2008 the FSA issued a public censure against Pacific Continental Securities in connection with advising on and arranging the sale of certain higher risk securities to customers between 1 April 2005 and 20 June 2007. It found that the serious nature of the breaches would have led it to impose a financial penalty of £2,000,000 were it not already in insolvent liquidation
On 19 January 2009, the Financial Services Compensation Scheme declared Pacific Continental Securities “in default” which means that PCS was unable or unlikely to be able to meet its liabilities. The firm’s collapse triggered a £49m compensation payout, the second largest after Keydata.
On 28 January 2009, Pacific Continental Securities, former Chief Executive, Steven Griggs and former Finance Director, Charles Weston were banned from working in the industry and fined £80,000 and £95,000 respectively by the Financial Services Authority.