Sub-standard sales practices, including a failure to highlight associated risks and the use of inappropriate sales tactics, were singled out by the FSA following a review of 30 high-risk share recommendations made by the firm between May 2006 and January 2007.
The regulator began its investigation following information which came to light as part of its ongoing programme of visits to small firms.
FSA director of enforcement, Margaret Cole, warned of the seriousness of the matter, saying: "This is our third recent fine against a stockbroker for treating customers unfairly and should be a warning to others that we will not hesitate to take action where it is necessary to protect consumers.
"Customers expect their stockbrokers to give them clear information, make suitable recommendations and not use unacceptable sales practices. In failing to do this, Mansion House treated its customers unfairly."
Mansion House was also found to have failed to set up adequate compliance procedures or ensure that its staff were properly trained. Furthermore, it had not disclosed the commission and charges it received in relation to the shares.
