View more on these topics

Coutts fined £6.5m over £1.4bn sales of AIG fund

The FSA has fined Coutts & Company £6.3m for a string of failings in connection with the sale of the AIG enhanced variable rate fund.

Coutts has agreed to carry out a past business review, overseen by an independent third party, in relation to all customers who remained invested at September 15, 2008 and will compensate those who suffered losses.

The FSA says between December 3, 2003 and September 15, 2008, Coutts sold the fund to 427 high-net-worth customers, with investments totaling £1.45bn.

UBS, Barclays Wealth and Lloyds TSB are also understood to have recommended the fund to a large number of investors.

AIG suspended withdrawals from the £6bn fund in September 2008 due to a rush of red-emptions triggered by concerns about the company at the height of the financial crisis.

Investors had half their investments returned later that year but were forced to lock the rest of the capital away for up to four years to guarantee it was ret-urned in full. Those wanting to access the rest of their investment in December 2008 had to take a 25 per cent hit on the remaining 50 per cent.

The FSA says there were a number of serious failings in the way Coutts sold the fund.

Coutts told customers the fund was a cash fund which invested in money market instruments and could be seen as an alternative to a bank or building society account. However, a significant proportion of the fund’s assets did not meet this description.

Coutts also failed to have an adequate sales process in place, its sales documentation failed to accurately describe the fund and its risks and advisers were given inadequate training.

The FSA says Coutts recommended the fund to some customers even though it may have exposed them to more capital risk than they appeared willing to accept and many were advised to invest a large proportion of their overall assets in the fund.

Coutts failed to respond appropriately to the changing market conditions in 2007 and 2008, when there was a greater risk of the fund suspending redemptions and of investor losses.

Coutts then failed to make the necessary changes to the way in which it sold the fund and did not ensure that advisers who sought to reassure existing customers provided a fair explanation of the risks.

FSA acting director of enforcement and financial crime Tracey McDermott says: “It is imperative that firms ensure that clients understand the nature of the product they are buying and the risks it involves.”

Coutts chief executive Rory Tapner says: “We had already implemented enhancements to our investment advice procedures, which provide reassurance that the past failings identified by the FSA will not be repeated.”

UBS, Barclays Wealth and Lloyds declined to comment.


Williams says MMR does not address the changed world

The world has moved on since the FSA started its mortgage market review and the proposals may not meet the needs of today’s market, according to Imla executive director Peter Williams. He said: “Do the FSA have a view of what landscape they are going to produce? And how does that landscape fit with the […]

House sales edge up in October

House sales edged up as demand increased in October, according to the latest Royal Institution of Chartered Surveyors UK housing market survey. During October, 8 per cent more chartered surveyors reported newly agreed sales rose rather than fell, representing a rebound in activity after the past month’s dip. Completed sales rose slightly to an average […]


How to switch back-office suppliers smoothly

Changing back-office suppliers is not a simple task. Differences in database schemas, platforms, user interfaces and external links can present a number of challenges. I hope this article will help you address some of these issues and smooth the transition if you decide to make the move. Manage the data transition Unfortunately, there is no […]

King backs bid to make BoE more accountable

Bank of England governor Mervyn King has told MPs he would back the creation of a new Parliamentary committee to boost the bank’s accountability. Under proposals in the draft Financial Services Bill, the bank’s powers will be extended considerably. The Prudential Regulation Authority and the financial policy committee will be based in the bank, alongside […]

Inheritance tax when it is relevant

Neil Jones is Technical Support Manager with Canada Life’s ican Technical Services Team. Canada Life offers a range of wealth management solutions, including retirement income planning, estate planning and investment solutions from a choice of jurisdictions, including the UK, Isle of Man and Republic of Ireland. A trust can offer significant advantages when an individual is […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm