The Financial Services Authority (FSA) said it had levied the penalties on St James’s Place UK, St James’s Place International and St James’s Place Unit Trust Group.
The fine was shared equally between the three companies, which are subsidiaries of wealth management firm St James’s Place Group.
The authority said it had discovered failings that exposed investors to the risk of surrendering existing investment contracts provided by rivals and committing money to new contracts where it may not have been in their interests.
The FSA said the firms’ processes for monitoring the deals, known as replacement sales, failed to detect and prevent serious record keeping problems.
This meant it was impossible to check whether or not the sales had been suitable for the investors without obtaining further details.
FSA director of enforcement Andrew Procter said financial services firms should have measures to ensure that advisers do their jobs properly.