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Bond failings cost Capita £300k fine

The FSA has hit Capita Trust Company, formerly Royal & Sun Alliance Trust Company, with a £300,000 fine for misselling precipice bonds.

It says the company advised a total of around 500 clients to invest in a variety of precipice bonds between June 1997 and September 2002 and these clients suffered losses which totalled around £3.5m.

In all 60 of the files reviewed by the FSA, it says the firm failed to take reasonable steps to ensure its customers understood the nature of the risks involved in the product, and in 95 per cent of these transactions the firm did not take reasonable steps to ensure the recommendation was suitable for the customer.

The FSA put Capita on notice in August 2001 that there were serious deficiencies in its advisory sales process but the regulator says the company did not review its past recommendations to check whether suitable advice had been given and it did not implement changes suggested by its consultants.

Capita took over the running of the book from Royal & Sun Alliance in May 2001.

The FSA says Capita Trust Company has co-operated fully with its investigations and will pay compensation to its customers. It says if this had not been the case then the financial penalty would have been considerably higher.

FSA director of enforcement Andrew Procter says:”It is essential that higher-risk products be promoted with great care and the risks must be clearly and unambiguously explained to customers.

“Over a sustained period, this firm failed to provide customers with suitable advice. Such a very high failure rate over such a prolonged period would normally merit a significantly higher financial penalty.

“However, in acknowledging its responsibilities to its customers, the firm has ensured that none of the investors will lose out as a result of the firm&#39s historic compliance failings and has co-operated fully throughout the investigation.”


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