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FSA fines N&P £1.4m

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.”

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. Easy money. Isn’t this a classic example of reaction to failings identified by the industry and public, rather than proactive consumer protection by the FSA?

  2. Meaningless as N&P are a mutual – so it means the members lose out, not the management or directors whoo walk on assets intact.

  3. I assume the FSA are having an Easter party and these funds will just about cover the costs?

  4. An IFA would probably have lost his permissions for doing that. How come the senior management escapes scot free – AGAIN??

  5. Goodness me – I presume that the FSA will now investigate every bank that acted as a tied agent for a life company for inappropriate advice.

    Could start with Barclay’s and move through the rest alphabetically.

    Tis a bit unlikely I s’pose!!

  6. All these firms allow their CEO to take retirement before the fine hits the papers, in this case after he said time and again that it wasn’t his fault, “a big boy did it and away”, well it was him and he did run away. How do the “members” of the Society feel now? How many have lost out because they were short-changed by the FSCS upper limit?

    AWD next?

    What have the regulators done for us?

  7. Graham Pattinson 18th April 2011 at 11:48 am

    Keydata were regulated and authorised by the FSA!! Being a mutual N & P has no shareholders, so the redress is borne by all of the members! The FSA should be fined for allowing Keydata to be regulated anf authorised so badly by themselves. Let’s face it, had Keydata not been authorised by the FSA in the first place, N & P would never have sold the products. Fines merely boost the FSA’s coffers and really do nothing for clients.

  8. This is like a lifeguard being paid a bonus for spotting drowned people in his swimming baths! Does anybody in the government know what`s going on at the FSA?

  9. How did my comment at 11:44 get on this thread AND on “Public sector workers issue legal challenge over RPI-CPI switch,” when it was meant for the latter?

  10. Graham and others are quite right – it is the members who ultimately foot the bill. I am a long standing customer of N&P and they have just re-introduced a fee for using an AUTHORISED overdraft by more than £10. I am still trying to get them to explain how they justify that charge when they charge an arragement fee and also interest. How do they justify a charge of £5 for going overdrawn by £10.01 for 24 hours?.

  11. @Graham Pattinson

    That is unfair. I submitted an FOI request to the FSA about its authorisation of Keydata last year.
    I was told that it could not give me the information because it is held in lots of different files. That sort of surprised me because I thought since advisers are supposed to keep client files readily available the FSA might do the same about firms it regulates but there you go.

    It also said it had simply allowed it through on the basis that the PIA had authorised it – but had destroyed the PIA records. Again that seemed a bit odd when it disapplied the long stop to firms.

    Finally it said the information was commercially sensitive – I suppose that makes sense. If it got into the public domain Keydata might become completely worthless as opposed to its current value of – er …

  12. Is’nt it the FSA who regulate the marketing of investments?

    Why did they allow ‘high risk’ products to be marketed as ‘Secure Income Bonds/Plans?’

  13. Mr. Jogga SinghTeidy BA (Hons) RGN Cert.Ed CMAP 25th April 2011 at 5:29 pm

    IT IS ABOUT GETITING COMPLIANCE ISSUES SORTED OUT FIRST,,.TCF HERE CITED, THEN IT’S IS ABOUT SALES! SALES! SALES!

    I THINK FINE ON IT’S OWN IS NOT APPROPRIATE, PROSECUTION AND JAILING SHOULD ALSO FOLLOW…THE CHAIRMAN DOWN!

    IN THIS WAY WE MAY ALL ENJOY A A LAWFUL,SAFE EXISTNCE!

    THE PUBLIC DO NOT UNDRSTAND THE FINANCIAL WORLD. THE FINANCIAL WORLD OF SOME PEOPLE THAT DO…ARE AT TIMES FOUND TO BE ABUSING THEIR POSTIONS OF TRUST THE CUSTOMERS PLACE IN THEM.

    PERSONAL ACCOUNTABILITY IAND LOSSES ON THE STAFF CONCERNED, IN ADDITION TO FINES, SET TO PUT THEM OUT OF BIZ, SO OTHERS MORE ABLE AND COMPLIANT CAN FILL THE GAP, IS THE ONLY WAY OF MANAGING SOCIETY…OTHERWISE WE HAVE THE SAME PEOPLE, MAYBE REFINING THEIR EVASIVE SKILLS?

    THIS NEEDS TO BE EXTENDED TO JUDGES, OTHER EXECUTIVES AS WELL…JOB DONE WE HAVE A SAFER SOCIETY BECAUSE WE ALLOW THE GOODIES OF SOCIETY TO RISE, RATHER KEEP THE FAILURES, DISSERVANTS OF IT PROPPED UP!

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