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18/04/2011
FSA Fines N&P £1.4 Million
The Financial Services Authority (FSA) has fined Norwich and Peterborough Building Society (N&P) £1.4 million for failing to give its customers suitable advice in relation to the sale of Keydata products.
N&P will make available ex gratia payments to all customers to ensure they do not lose out as a result of their investment, amounting to approximately £51 million in total.
During a period of over three years N&P advised 3,200 clients to invest in Keydata’s life settlement products. N&P failed properly to assess the financial circumstances of many of its customers, designating them as having a higher tolerance of risk than was appropriate. This led to unsuitable sales. Some customers were moved out of low risk products such as deposit accounts into Keydata investments, putting their income and capital at risk. Many of these customers were approaching or already in retirement, and could not afford to lose their money.
In June 2007 N&P carried out a review prompted by the realisation that Keydata products formed 30% of all investment products sold during the first three months of that year. Their compliance team produced a report setting out concerns about the suitability of advice given to customers. No effective action was taken and Keydata sales remained consistently high.
Tracey McDermott, FSA Acting Director, Enforcement and Financial Crime, said: “N&P failed in its basic duty to provide suitable advice to its customers, despite an internal compliance report pointing out that there were problems as early as 2007.
“Firms cannot treat customers fairly unless they pay attention to their financial circumstances and attitude to risk when they make recommendations. This is the only way to prevent widespread mis-selling like this.”
N&P has also agreed to commission an independent review of sales of other financial products sold by their Financial Advice Service, and will pay redress where appropriate.
N&P co-operated with the FSA’s investigation and agreed to settle at an early stage.
(BMcN/GK)
N&P will make available ex gratia payments to all customers to ensure they do not lose out as a result of their investment, amounting to approximately £51 million in total.
During a period of over three years N&P advised 3,200 clients to invest in Keydata’s life settlement products. N&P failed properly to assess the financial circumstances of many of its customers, designating them as having a higher tolerance of risk than was appropriate. This led to unsuitable sales. Some customers were moved out of low risk products such as deposit accounts into Keydata investments, putting their income and capital at risk. Many of these customers were approaching or already in retirement, and could not afford to lose their money.
In June 2007 N&P carried out a review prompted by the realisation that Keydata products formed 30% of all investment products sold during the first three months of that year. Their compliance team produced a report setting out concerns about the suitability of advice given to customers. No effective action was taken and Keydata sales remained consistently high.
Tracey McDermott, FSA Acting Director, Enforcement and Financial Crime, said: “N&P failed in its basic duty to provide suitable advice to its customers, despite an internal compliance report pointing out that there were problems as early as 2007.
“Firms cannot treat customers fairly unless they pay attention to their financial circumstances and attitude to risk when they make recommendations. This is the only way to prevent widespread mis-selling like this.”
N&P has also agreed to commission an independent review of sales of other financial products sold by their Financial Advice Service, and will pay redress where appropriate.
N&P co-operated with the FSA’s investigation and agreed to settle at an early stage.
(BMcN/GK)
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