Lloyd's broker Besso has been fined £20,000 by the FSA for failing to apply for approval of an employee who held a management role at the firm.
The regulator said the seriousness of the failing was reinforced by the fact that the employee had previous convictions for fraud and was also alleged to have perpetrated various frauds while he was employed within the Besso group.
The current allegations are the subject of a police investigation.
Margaret Cole, FSA director for enforcement, said: "This case visibly illustrates the potential risks that can arise where firms fail to follow the correct regulatory procedures.
"It is very important for firms to submit applications for approval at the right time and in the proper way.
She added: "Other firms should take heed."
A Besso spokesman said: "Besso fully accepts the FSA's ruling. The company's own internal controls had brought the matter to its attention in August 2005.
"At that time the company immediately informed the FSA and fully cooperated with the subsequent investigation."
He said: "The FSA commended the company for its conduct throughout."
Ian Mason, a partner at City law firm Barlow Lyde & Gilbert, said "This is the first case where the FSA has used its new discount scheme on fines, and the firm received a 30% discount for settling the case early, otherwise it would have been higher."
