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£750k fine for BoS fund admin failure

Bank of Scotland has been hit with a fine of £750,000 by the FSA

for failures in administering its Pep and Isa funds between November

1999 and August 2001.

According to the FSA, BoS put 30,000 Pep and Isa fund customers at

risk of losing money and increased its own exposure to potential

fraud.

The regulator says the bank&#39s systems used to administer Peps and

Isas meant it could not be sure how much money it was holding on

behalf of individual customers.

The problems were caused by systematic failings in controls and

inadequate staff training, which BoS has now addressed. The bank will

pay £10,350 compensation to 5,539 customers.

The FSA has accepted that BoS did not deliberately contravene

regulations and has been co-operative but it considers its failings

to be particularly serious, partly because of its large customer base.

Although it experienced similar reconciliation issues with its

previous Pep system, it let them recur in the new system, staff were

not well enough trained and it failed to inform the regulator when

system problems increased.

Additional problems occurred in February 2000 when some investors

were sent statements containing errors.

BoS concedes it took too long to solve the problems, which it

regrets, but says it has learned a number of hard lessons in the

process.

FSA director for enforcement Andrew Procter says: “Investors are

entitled to be confident that their funds are being accurately

administered. This case demonstrates why regulated firms must have

good processes and procedures in place to ensure that this happens.”

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