The FSA has fined Norwich and Peterborough Building Society £1.4m for failing to give customers suitable advice in relation to the sale of Keydata products.
N&P will make available ex gratia payments to all customers to ensure they do not lose out as a result of their investment, amounting to approximately £51m in total.
Over a three year period N&P advised 3,200 clients to invest in Keydata’s life settlement products.
The FSA says N&P failed to properly assess the financial circumstances of many of its customers, classifying them as having a higher risk tolerance than was appropriate and leading to unsuitable sales.
Some customers were moved out of low risk products such as deposit accounts into Keydata investments, putting their income and capital at risk. Many of these customers were approaching or already in retirement, and could not afford to lose their money.
In June 2007 N&P carried out a review after finding Keydata products made up 30 per cent of all investment products sold during the first three months of the year. Its compliance team produced a report setting out concerns about the suitability of advice given to customers. No effective action was taken and Keydata sales remained consistently high.
FSA acting director of enforcement and financial crime Tracey McDermott says: “N&P failed in its basic duty to provide suitable advice to its customers, despite an internal compliance report pointing out that there were problems as early as 2007.
“Firms cannot treat customers fairly unless they pay attention to their financial circumstances and attitude to risk when they make recommendations. This is the only way to prevent widespread mis-selling like this.”
N&P has also agreed to commission an independent review of sales of other financial products sold by their financial advice service, and will pay redress where appropriate.
N&P chairman Gordon Horsfield says: “The society is committed to its members and has been deeply concerned for those customers who bought these products and who lost out following Keydata’s administration in 2009. Our aim in making ex gratia payments is to put that right and we are very sorry for the hardship and anxiety that they have suffered.”