A stockbroker firm linked to Rangers owner Craig Whyte has been banned by a finance watchdog after it used clients’ money to pay expenses.
Pritchard Stockbrokers Ltd has been punished by the Financial Services Authority (FSA) after it "used client money to meet its own expenses, thereby putting client money at risk."
Mr Whyte, who bought over Rangers for a nominal £1 in May 2011, has been company secretary at the Bournemouth-based firm since he invested in the business in 2009.
On Monday, Rangers lodged a notice of intention to appoint administrators with the Court of Session as the action was taken against Pritchard.
In its findings, the authority has effectively placed the stockbrokers in lockdown, as it can “not carry on any of the regulated activities” apart from "to close out transactions which have already been commenced".
The FSA also has an order in place to stop the firm selling on or releasing any of its assets over "concerns" about its dealing with clients’ money.
The watchdog ruled Pritchard “failed to arrange adequate protection for clients' assets when it was responsible for them" by allowing "client money to be used on Pritchard’s own account".
It also said it was "not satisfied that Pritchard is a fit and proper person having regard to all the circumstances" after the findings of its investigation and it had made the in order to "protect the interests of consumers" with immediate effect.
In response to the findings outlined in the supervisory notice, a spokesman for Pritchard Stockbrokers Limited said: "The FSA involvement concerns a technical matter which we are currently addressing. We are liaising closely with the FSA.
"Craig Whyte has been the company secretary since he invested in Pritchard."
Merchant House Group, which acted as an introducer to Mr Whyte when he launched his six-month takeover bid of Rangers, is one of Pritchard’s clients.
It confirmed on Monday that it was taking steps to appoint other money handlers after the money-handling ban on Pritchard.
In a statement to the stock exchange, the company said: "Merchant Capital, a wholly-owned FSA-regulated subsidiary of MHG, is a client of Pritchard, which holds all client monies of Merchant Capital's Structured Products division (but not other divisions) in segregated client money bank accounts.
"The group is in the process of making arrangements for the handling of client monies with alternative providers. The board of MHG does not believe that the group or any of its clients will suffer economic loss as a result of the notice."