View more on these topics

FSA fines Standard Life £2.45m over pension sterling fund

The FSA has today fined Standard Life £2.45m for serious systems and controls failings that resulted in the production of misleading marketing material for its pension sterling fund.  

The regulator found that despite the majority of the fund being invested in floating rate notes by July 2007, marketing material issued by Standard Life referred to the fund as being wholly invested in cash.

There were approximately 98,000 retail consumers invested in the fund as at December 23, 2008.

Money Marketing first revealed in January 2009 that Standard Life had to revalue its pension sterling fund, resulting in a fall in value of almost 5 per cent.

The FSA found that between July 10, 2006 and February 28, 2009, Standard Life failed to ensure that there were proper systems and controls over the fund, specifically in relation to the marketing material produced.

This resulted in a risk of unexpected capital losses being incurred for those customers invested in the fund.

The FSA also found that there had been a lack of prompt and full investigation of concerns that arose about that marketing material.

It says the risk of unexpected consumer losses was demonstrated by the reduction in value of the fund by 4.8 per cent, approximately £100m, on January 14, 2009.  

The FSA adds that Standard Life proactively paid a total of £102.7m into the fund to restore the value of investors’ holdings to the position they would have been in prior to the fall in the unit price.  

In addition, Standard Life contacted existing customers identified as having received poorer quality marketing material in order to determine whether any further compensation may be required in their individual cases.  

The FSA says Standard Life also commissioned a report by an independent third party into the systems and controls relating to the marketing material issued in respect of the fund and improving the systems and controls.

FSA director of enforcement and financial crime Margaret Cole says: “The FSA takes the issue of misleading financial promotions very seriously and the fine announced today demonstrates our commitment to the principle of credible deterrence. It is critical that consumers are given an accurate understanding of the nature of investment products and the risks involved. Without this information, consumers are unable to make informed decisions about whether investments are suitable for their individual investment strategy.

“The failures at Standard Life arose because there were inadequate systems or controls in place to ensure that marketing material issued accurately reflected the investment strategy for the fund. There were also inadequate processes in place to enable effective communication between business areas and committees resulting in a lack of awareness of any divergence between the marketing material and investments held by the fund.”

A Standard Life spokesman says: “We have learned important lessons from this mistake and have made significant improvements to our marketing literature processes to prevent the same thing happening again. When our own internal review identified problems with some of our literature in February last year, we immediately apologised to customers and injected over £100m into the fund to compensate them for their losses from the sudden fall in unit price.  

“Since then, we have conducted a full and thorough review of existing literature and put in place a new improved process for new literature. We have worked closely with the FSA throughout and co-operated fully with its investigation.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 28 comments at the moment, we would love to hear your opinion too.

  1. Wow – expensive mistake on Standard’s part, but they still get away with it from a credibility perpsective. It’s not the first time for them – how’s that work?

  2. Whilst not a defender of banks or insurance companies it does seem to me that when an institution discovers flaws in its systems and takes steps to rectify these, and also ensures that its clients are put into a no loss position, all of which action is voluntary, to impose fines has more to do with generating income for the regulator than providing any benefit for the consumer. No surprise there then.

  3. That should cover a few nights over-the-odds hotel bills for the top boys at the FSA!!!!!!

  4. With this windfall for the FSA will our fees be reduced or fat bonuses paid to FSA staff while we struggle..
    no prizes for the answer…

  5. This is ludicrous. SL sorted the matter itself and no-one lost any money. The FSA then levied a ‘fine’. So, why?

    This is a classic example of what happens when powers are not separated. The FSA is judge, jury and executioner.

    Who’s ‘fined’ the FSA for its epic failures over the banks and its complicity with the government’s stupidity with our money?

    And just suppose SL was still mutual it would have been the same owners who’s money SL was managing that would have been ‘fined’.

    The whole system is utterly bonkers. And anyway, since the FSA has failed, it is now acting like the Stasi did when it reorted to simply shooting people who were no longer in fear of its Terror. The FSA is now just metaphorically shooting people.

  6. Philip Meadowcroft 20th January 2010 at 11:23 am

    Selwyn: it helps the FSA to pay mega-sized hotel bills for its top brass.

  7. I agree this is ridiculous. They have fined the shareholders, who had to put the £100m+ in to the fund anyway. The company did that quickly and voluntarily – maybe there is a time and place for the FSA occasionally congratulating someone for doing the right thing, rather than levying pointless fines just so they can feel important.

    I agree the FSA completely failed on the banks, but still seem absolutely free to act as a bully boy wherever they see fit – with no effective oversight.

  8. I totally agree with the anonymous comment placed at 11:11am although I am prepared to put my name to it, as I always am if I make a comment.

    I also wholly agree with Selwyn Goldberg.

    I am obviously becoming more cynical or indeed an aggressor to a rather flawed system of control, but there again whilst ever the FSA is ‘Government’ controlled it is not ever going to be right.

  9. Has everyone forgotten that SL originally tried to say their policy holders would have to take the losses? It was only in the during the furor that followed that they “rectified” the situation, they deserve the fine for that alone!

  10. Investors in UK Banks were assured by the Regulator that these businesses were ‘properly regulated’. They were not and shareholders lost billions of £’s. Is the FSA going to arrange compensation and to whom is it going to pay the fine?

  11. Interesting comments, thus far.

    I guess it sends the message to companies that they cannot please loose and fast with policyholders (and advisers).

    As Mr Anonymous 11.33 a.m. rightly pointed out, SL only made restitution when they were coshed into submission by the outcry. Until then they told everybody, “tough”.

    On this occasion I applaud the FSA action as there are too many instances of providers changing the rules, altering the terms orgenerally misbehaving and thinkign they can do so with impunity.

  12. Patricia Campbell 20th January 2010 at 12:21 pm

    I agree wholeheartly with this. Standard life may have rectified the situation but not until the complaints starting going to them. I personally spent at least 4 days discussing this with my clients, explaining what had happenned and then re-explaining once they did a u-turn. Did i get paid or compensated for this – no this is part of treating customers fairly to keep them updated so yet again for life office incompetencies my time was wasted

  13. Sadly it was always going to be a matter of time before SL got fined once they demutualised. Surprised it has taken this long.

  14. I spent a great deal of time dealing with this problem for no reward. SLs main defence to clients was that it was my fault for recomending the fund. If the FSA get £2.45m, my claim for costs is going in now.

  15. This is another massive failure of FSA monitoring and regulation.

    They should have identified this before the fund value dropped and before SL took the appropriate remedial action.

    The FSA should be thanking SL for preventing it being more embaraassing and they should be taking all the SL staff out for a slap up week end on FSA expenses that the rest of us can pay for.

  16. I agree with Anonymous 20 Jan 2010 11:33 am. SL did not just decide to magnanimously pay £100 odd million into the fund. Their initial attitude was ‘tough shit’ to the fundholders…..it took a campaign by many in the industry to get them to change their minds.

    This also sets a precedent to other fund managers who are involved in ‘fantasy marketing’ …. ‘food is the new gold’ and all!

  17. If the naivety of some people who post on here is any indication of their ability to spot a dead parrot then we should be worried.

    Standard Life did not make an ‘error’, it did not resolve the matter of its own volition, the regulator was expected to make a meal of this and eventually it did, with some gentle persuasion..

  18. @anonymous at 1.08 pm.

    There is absolutely no way that the FSA, or any regulator come to that, could possibly have identified this. Just how many more people do you think they’d need to do that? It’s risible. So who did spot it? Well, as I recall (and I am happy to be corrected) it was us IFA’s what shopped ’em. In other words freedom and markets work and reg-yew-lay-shun don’t, and never ever will. End of.

    PS I am the earlier anonymous poster. I have good reasons for posting anonymously on this topic. Mostly I am absolutely clear about posting under my own name.

  19. I totally agree with the fine. As a number of people have said it took complaints and press furor before they put in the £100m. I was one of the customers affected and wrote a complaint letter before they announced the £100m rectification.

    As I had been switching out of the fund on a regular basis after my initial investment I was due further compensation as fund prices were tracking lower than a pure cash fund. It took SL 8 months and my regular chasing before my complaint was responded to and the additional compensation due to me paid.

  20. Any suggestion that Standard Life did the right think willingly is nonsense. They had to be forced to act. Without public pressure I doubt if they would have done more than hide behind TOB docs.
    TCF is still an alien concept to this company.

  21. This is ludicrous. SL sorted the matter itself and no-one lost any money. The FSA then levied a ‘fine’. So, why?
    – – – – – – – – –

    I agree with many of the above comments but my issue is this. Standard Life resolved the problems and stumped up their own cash. yet they are fined for systems and controls failings.

    but the problems over at Windsor Life (systems and controls failings again) have been going on for much longer, affect more policyholders and without resolution. Anyone who has clients with Windsor will know what i’m talking about. those issues started in 2007 yet they seem to have got away scot free.

  22. The fine is disproportionate. The FSA’s ‘credible deterrance’ would have more credibility if it pursued the Boards of RBS and HBOS !

  23. There is one impact of the fine which has not attracted comment so far. As an ex lifeco emplyee who encountered more than one dodgy practice within my employer’s approach I met a brick wall in trying to get them to “Do-the-decent-thing”. Being able to report to one’s bosses that a 7 figure fine could result from inaction strengthens the arm of junior staff in putting an oar in.
    There is however a big problem if a company fessing-up and correcting a previously un-noticed “error” then gets fined. This is an incentive not to rectify but to conceal errors.

  24. Companies never seem to learn and the Axa fine in 2004 raised similar issues about checking data and lack of ownership.

    Companies should read these enforcement notices and carry out a thorough review of their processes and controls. The blame culture in firms means no one wants to take ownership.

    Only an holistic approach to checking and approving financial promotions and customer literature will truly result in it being clear, fair and not misleading. The role of a competent approver is much undervalued.

  25. Bonkers ! as usual this makes a complete mockery of regulation. The Issue has been sorted by SL no client disadvantaged and the FSH seeing an opportunity to line it’s own pockets. Madness !

  26. Two camps
    One says no need to fine the other says good job FSA forced to act.

    I say well done IFA’s for spotting the problem causing a fuss and getting the media to shake the tree.
    However, if there is to be fine then it should be against the Standard Life Board members individually not the with profits fund /shareholders as otherwise they care little or nothing.

  27. Although SL done wrong, in the end they corrected their mistake at the cost of 100 million. What infuriates me is that the FSA are their to make sure policy holders get a fair deal. Do you think the policy holders of Standard Life are going to get a fair deal now that Standard Life are having to find 2.45 million? Who suffers!!!!!!!

Leave a comment

Close

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

Email: customerservices@moneymarketing.com