UK division of European financial giant settles early with FCA to avoid fine of almost £17.7 million following FCA inspection which unearthed improper advice on investment products
Amid the Financial Conduct Authority (FCA)’s current drive toward strengthening its regulatory stronghold over individuals and companies which offer financial advice to retail clients, the British regulatory authority has today announced that it has fined the UK division of European financial giant Santander to the tune of £12.4 million for what it considers to be widespread investment advice failings.
The FCA has been carefully scrutinizing the methods by which companies provide advice, including giving serious consideration toward the regulation of lead traders within social trading networks as investment advisors.
In this particular case, the FCA states that there was a significant risk of Santander UK giving unsuitable advice to its customers, its approach to considering investors’ risk appetites was inadequate, and for some people it failed to regularly check that investments continued to meet their needs – despite promising to do so.
The FCA’s investigation found that Santander UK had not only failed to make sure that its advisers were fully getting to grips with customers’ personal circumstances before making a recommendation, including understanding how much risk they were willing to take, but also did not ensure that customers investing were given clear and not misleading information about its products and services.
With regard to the Premium Investments which the company offers, the FCA’s inspection revealed that Santander UK failed to carry out regular ongoing checks to ensure the investment was still meeting customer needs, as well as failing to make sure new advisers were properly trained before being allowed to give investment advice.
In addition, Santander UK had not acted in order to properly monitor the quality of investment advice which meant that, where poor advice was given, it was not always picked up.
The failings took place despite repeated communications and warnings about suitability of advice to the industry by the Financial Services Authority (FSA), the FCA’s predecessor, and were uncovered by both a mystery shopping exercise and wealth management thematic review by the regulator.
When the FSA first put its concerns to Santander UK in late 2012, the firm immediately decided to stop giving financial advice in branches to prevent further problems occurring.
Santander UK agreed to settle at an early stage of the investigation so its fine was reduced by 30%. Were it not for this discount it would have been fined £17,682,730.
Tracey McDermott, director of enforcement and financial crime, today made a public statement that “Customers trusted Santander to help them manage their money wisely, but it failed to live up to that responsibility. If trust in financial services is going to be restored, which it must be, then customers need to be confident that those advising them understand, and are driven by, what they need. Santander let its customers down badly.”
“In agreement with the FCA, Santander will now contact all affected customers and, for any sales that were sub-standard, redress will be paid where due.”
“Because the value of the stock markets has risen since many of these investments were first made, it is likely that consumer losses – and therefore redress for some – will be minimal. Customers who held a Premium Investment, which were promoted as offering a tailored service including to reallocate investments and rebalance portfolios, may get redress if they paid for a service they did not receive” concluded Ms. McDermott.