Barclays Bank has been fined £7.7 million by the FSA in relation to the flawed sale of two investment funds – the highest FSA fine ever imposed for retail failings.
Between July 2006 and November 2008 Barclays sold Aviva’s global balanced income fund and the global cautious income fund to 12,331 people with investments totalling £692m.
The FSA identified a number of serious failings relating to the way these funds were sold, including:
- Failing to ensure the funds were suitable for customers in view of their investment objectives, financial circumstances, investment knowledge and experience;
- Failing to ensure that training given to sales staff adequately explained the risks associated with the funds;
- Failing to ensure product brochures and other documents given to customers clearly explained the risks involved and could not mislead customers; and
- Failing to have adequate procedures for monitoring sales processes and responding promptly when issues were identified.
The FSA’s investigation revealed that even though Barclays had itself identified potentially unsuitable sales as early as June 2008, it did not take appropriate and timely action.
Of the 12,000 or so investors, most of whom were retired or nearing retirement, 1,730 complained about the advice they were given to invest in the funds. This equates to approximately one in seven investors.
During the investigation Barclays continued to carry out a past business review to evaluate the suitability of the sales of both funds: 3,099 sales of the Cautious Fund (51% of all sold) and 3,378 of the Balanced Fund (74% of all sold) have been identified as requiring further consideration.
As a result Barclays has already paid approximately £17 million in compensation and the FSA estimates up to £42 million further could be paid to customers who received unsuitable advice.
FSA managing director of enforcement and financial crime Margaret Cole says: “The FSA requires firms to have robust procedures in place to ensure any advice given to customers is suitable. Therefore, when recommending investment products, firms should take account of a customer’s financial circumstances, their attitude to risk and what they hope to achieve by investing.”