First Direct is to pay compensation to investors for selling complex investments through its self-serve platform without checking whether the products were suitable.
The Financial Times reports that the online and telephone-based HSBC subsidiary has admitted it did not have the proper procedures in place to ensure the products were being targeted at experienced investors.
Among the complex products sold were warrants, permanent interest bearing shares and exchange-traded commodities. First Direct has now removed these products and improved its systems to prevent complex products from being offered through its service.
In a statement, First Direct told the newspaper: “We have carried out a review of the investments that some of our customers hold or have held on our self-select investment platforms and have found that some of them should not have been available.
“This is because they are defined as ‘complex’ and not appropriate for a self-select investment service without assessing a customer’s knowledge and experience for appropriateness. We are currently in touch with the customers affected and are working with them to ensure they will be compensated for any loss as appropriate.”
Customers who made a loss will receive compensation plus interest, taking into account dealing fees. Customers who have made a gain will not be compensated.