FSA fine building society £1.4m for mis-selling investments
- AuthorAndrew Leakey
The Norwich and Peterborough Building Society has this week been fined £1.4m, after the Financial Services Authority (FSA) found the society had failed to give their customers suitable advice. On top of this fine, the society has also agreed to make compensation payments to customers, totalling £51m.
The building society sold high-risk policies provided by the now insolvent Keydata investment firm. The FSA determined that these investments were inappropriate and that the society 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.
The problem for customers, and thousands of other people who were sold Keydata polices by independent financial advisers, became evident when Keydata was closed down by the FSA in 2009. The policies sold were based on second-hand life insurance policies bought from elderly people in the US. The investors would earn a return when those people died and the life insurance policies paid out. After Keydata's closure it swiftly emerged that £103m invested, had in fact been stolen in a fraud.
The FSA said that the policies, sold over a period of three years, were unsuitable for the society’s customers. They also revealed for the first time that the society knew as far back as 2007 that the policies might be unsuitable for its customers. However, they took no action and continued to sell them vigorously. They also failed to properly to assess the financial circumstances of many of its customers, designating them as having a higher tolerance of risk than was appropriate.
The collapse of the investment firm has become the biggest problem yet for the Financial Services Compensation Scheme (FSCS), who investigates claims against financial bodies that have become insolvent. The management of Keydata is still being investigated by the Serious Fraud Office (SFO).
The FSA have a role to manage financial institutions such as this, and I find it refreshing to see them penalising a company for providing poor advice on investments. This stance will hopefully be used in the future for lenders that also fail to advise people properly when taking out loans or insurance policies, or fail to assess whether or not a person can reasonably afford a loan.
Stephensons can assess loan agreements to see whether or not they can be challenged, or can advise you as to whether your loan has been missold. If it can be challenged, you may be entitled to Legal Aid, subject to financial eligibility. You should contact our specialist consumer team on 01942 777777 to speak to one of our advisers.
By consumer solicitor, Heather Korwin-Szymanowska