FSA fines Santander £1.5m over compensation scheme

| February 20, 2012 | 0 Comments
FSA fines Santander £1.5m over compensation scheme

The Financial Services Authority (FSA) has fined Santander £1.5m for failing to explain to customers that some of its investment products were not covered by the Financial Services Compensation Scheme (FSCS).

The FSCS is a financial safety net which pays compensation to customers of financial services firms authorised by the FSA, if the firm itself cannot pay a claim against – if they cease trading, for instance.

The scheme covers deposits, insurance policies, insurance broking and home finance, as well as investment business.

Between 2008 and 2010 Santander sold £2.7 billion of structured investment products which were not fully covered by the FSCS, but failed to tell customers that the cover was limited.

Although investors did not incur any financial loss as a result of the lack of information, the FSA imposed the fine because Santander did not confirm whether the products were covered quickly enough.

Customers began to question whether products were covered in 2008, but despite knowing in June 2009 that its Guaranteed Capital Plus and Guaranteed Growth Plan only had limited FSCS cover, Santander did not update its literature with this information until 2010.

The FSCS cover on these products was limited because they were held by subsidiaries of Santander.

Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said “When firms provide customers with literature about products, the information has to be correct and unambiguous.

“After all, it is there to help people make informed decisions about whether to invest.”

Santander said it was disappointed with the outcome of the investigation but would not challenge the decision.

In related news, the FSCS is currently in the process of sending compensation application forms to around 4,000 private customers of MF Global UK Limited, which appointed administrators in late 2011.

Tags: , Financial Services Compensation Scheme, FSCS,

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