Stockbrokers falling short of best practice, Central Bank probe finds

A number of stockbroking and investment firms have been falling short of best practice standards regarding retail customer care, a Central Bank probe has found.

The study of 32 firms — which began last October — found that many were falling short of “best execution” standards as set out by the EU.

“Best execution” refers to a company’s obligations to its customers to get the best possible result when buying or selling financial products on their behalf, with regard to things like price, commission costs and speed of conclusion.

While no sanctions have been handed down, no companies named, or instances of customers losing value on their transactions highlighted, the Central Bank has given relevant firms until the end of August to tell it in writing that they have reviewed their practices and implemented any necessary changes.

Following an initial “desk-based” review of 32 investment firms — which generally found a widespread lack of detail being communicated to customers — the Central Bank followed up with onsite inspections of three firms.

These visits found differences between each company’s execution practices.

The Central Bank also noted that the firms had difficulty in providing sufficient evidence in order to demonstrate that they had followed their best execution policy.

“Clients must have confidence that investment and stockbroking firms will act in their best interest at all times, and will have arrangements in place to ensure that all reasonable steps are taken to deliver the best possible result for them,” said Bernard Sheridan, director of consumer protection at the Central Bank.

“Best execution is a crucial aspect of client protection. It is important that the highest standards of due care and diligence are followed by a firm when carrying out orders for clients.”