The stockbroking firm has had to cough up for the persistent use of high pressure sales tactics, alongside giving out misleading information, in order to sell customers shares they did not want or could not afford.
The failings warranted a fine of £1.5 million but this was reduced after Square Mile agreed to settle at an early stage of the investigation as a result of its financial circumstances.
The FSA reviewed 55 transactions carried out by Square Mile between March and May 2006, some involving older persons and inexperienced investors.
The review found that Square Mile had set up a high pressure sales business that disadvantaged customers and did not have appropriate controls.
It also showed that Square Mile knew its advisers frequently used unacceptable sales tactics and sometimes failed to get a customer's consent before selling them high risk shares.
Furthermore, Square Mile made false statements, provided inaccurate and misleading information and failed to disclose important details and significant risks about the shares to its customers. It also made recommendations without first ensuring these were suitable for the customer.
"High pressured sales practices are wholly unacceptable, " said the FSA's director of enforcement, Margaret Cole. "Firms that use such sales tactics undermine the regulatory requirement to treat customers fairly - a firm's customers are entitled to rely on it to provide them with advice and information that is clear, accurate and not misleading.
"The FSA will not tolerate any regulated firm coercing customers into buying financial products or services they do not want or can't afford.
"We are currently reviewing how stockbroking firms conduct their business and will not hesitate to take action against any that falls short of the standards we expect. "
Square Mile's failings came to light as a result of ongoing visits by the FSA to assess the practices of small firms when selling higher risk shares.
The firm has since made changes to its management structure, with the appointment of a skilled person to assess systems and sales practices. Square Mile has also undertaken to pay for independent approval of its transactions and new account openings.
