The unauthorised broker, William Anthony 'Robin' Radclyffe of Salisbury, was sentenced on Monday for offences including theft.
Radclyffe faces a 15-month jail term after pleading guilty to 15 offences, with a further 34 taken into consideration.
He has also been prohibited from assuming the position of company director for a futher five years.
"Our prosecution of this case is indicative of the FSA's determination to deter wrongdoing of this sort," said Margaret Cole, FSA director of enforcement.
"Mr Radclyffe breached the trust of his clients, many of whom were friends, without consideration for how they would suffer by his actions.
"We hope others considering such dishonest conduct will take notice of the custodial sentence imposed.
From 1997 to 2004, Radclyffe made false and misleading statements to his clients and investors, the majority of whom were friends, about both the management and profit made by an illegal collective investment scheme that he was operating.
He also stole an investment portfolio valued at almost £100,000 and dishonestly failed to return £20,000 he owed to his former partner, who also invested in his scheme.
All proceeds were used to fund his day-to-day expenses, including his children's school fees, and his own unsuccessful investment strategies.
However the FSA highlighted that as Radclyffe was not authorised, his clients will not have access to the Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS).
