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First Direct to pay redress for misselling complex products

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.


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Quick, everyone log on to your self-serve platform of choice and see if they offer PIBS or commodity ETFs, it’s a one way bet. Fill yer boots!!!

  2. Sorry – this is daft… self-serve = self choice…. so should the Stock Exchange be guilty whenever anyone who is not deemed sophisticated enough buys a product because it is there?

    Let’s say that any investments which could fall in value are only suitable for investors who posses the necessary degree of sophistication to buy them in the first place. Well, of course, so every direct customer must complete a full fact find so we can ensure they are sophisticated enough and naturally that the investments could be suitable for them.

    Now, is this judgement at the same time that several firms are offering discretionary investment management services direct to customer… hmmmm, curious! Now how on earth will they fit (or will they fit as long as the values always only go up and if they fall they’ll be found guilty m’lud!)

  3. Contractually anon 16th October 2014 at 11:32 am

    Key quote ‘not appropriate for a self-select investment service’.

  4. I can see the previous two posters point, but PIBs and warrants and ETCs will be more complicated than for some people,
    The problem is, how does anyone make available a complicated product for those who feel able to make their own choices and accept the risk?
    The regulation here of investments, exceeds the regulation on gambling where people often put down a bigger (which is all lost) than they pay in to their savings and investments!

  5. @Contract anon – I don’t get what you mare aiming at. I understand self select should be self explanatory. Positive or negative comment?

  6. Contractually anon 16th October 2014 at 12:05 pm

    Sorry Philip, I’m agreeing that First Direct should be redressing these if they have determined that they shouldn’t have offered them in the first place and disagreeing that if a customer chooses to opt for self select, then they deserve everything that’s coming to them. Based on First Direct saying the products were not appropriate for the channel.

    If a distribution channel is developed, it needs to be developed with the user, and the appropriateness of the products in mind.

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