The Savoy business, a sister company of Ashcourt Rowan, was served with a Section 166 order by the FSA as the result of a thematic review into investment suitability.
Section 166 orders are used by the FSA to see if there have been a breach of any rules or any systems and controls failures which require further regulatory action.
The firm had already been issued a previous order in 2009 but failed to implement the changes required.
The FSA said Savoy failed to take reasonable care to ensure the suitability of investment portfolios of its wealth management clients. Some 23 per cent of the files sampled showed a high risk of unsuitability and lacked information on clients' personal and financial circumstances.

The fine was announced today in the firm's interim results for the six months to 30 September.
Kenneth West, chairman of the board, said: "We are announcing today that we have agreed to a fine of £412,000 from the FSA for a number of legacy issues relating to investment suitability in our Savoy business.
"This is clearly a significant fine but we have chosen to accept the FSA's findings and agree an early settlement with them to enable the business to move forward.
"In the past our processes and systems were not as robust as they should have been and this has been a key focus of the Change Management Programme over the past year.
"It is absolutely right that we should resolve legacy issues like these ones whilst aiming to build best in class administration and compliance systems for the future."
The Change Management Programme was set up a year ago to create an integrated wealth management group. Changes include development of an RDR-compliant proposition, full launch of an advisory platform, integrated asset management activities and development of a single platform for investment management.
Jonathan Polin, chief executive, added that he believed other firms could be similarly fined.
"The focus of the regulator on the wealth management sector is at a historic high, as this sector has not modernised with the same speed and vigour as other areas of the financial services industry.
"Savoy is the first firm to be penalised for this but it is in my view highly likely that others will follow."