Record £7.7m fine for Barclays

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The Independent Online

Barclays was today fined £7.7 million and will have to pay out up to £60 million in compensation for investment advice failings.







The fine, which is the largest yet levied by the Financial Services Authority for retail failings, comes after the group failed to ensure two investment funds it sold to more than 12,000 people were suitable for them.



The regulator said that despite the fact Barclays had identified potentially unsuitable sales were taking place as early as June 2008, it failed to take appropriate and timely action to rectify the situation.







Between June 2006 and November 2008, Barclays sold Aviva's Global Balanced Income Fund and Global Cautious Income Fund to 12,331 people, who collectively invested a total of £692 million.



But the group failed to ensure the funds were suitable for customers, taking into account their investment objectives, financial situation and investment knowledge, despite the fact that most of them were either retired or approaching retirement.



It also failed to ensure that sales staff understood the risks associated with the funds, or that brochures and other documents given to customers clearly explained them and were not misleading.



The FSA also found that Barclays did not have adequate procedures in place for monitoring sales and responding prompting when problems were identified.



It added that 1,730 of the just over 12,000 investors had complained about the advice they were given, the equivalent of around one in seven people.



During the investigation, Barclays continued to carry out its own past business review on the suitability of the sales of both funds.



It found that 51% of all of the Cautious fund sales and 74% of the Balanced fund sales required further consideration.



The group has already paid out £17 million in compensation, and the FSA estimates that up to a further £42 million could be paid to customers who received unsuitable advice.



Margaret Cole, the FSA's managing director of enforcement and financial crime, said: "The FSA requires firms to have robust procedures in place to ensure any advice given to customers is suitable.



"On this occasion, however, Barclays failed to do this and thousands of investors, many of whom were seeking to invest their retirement savings, have suffered. To compound matters, Barclays failed to take effective action when it detected the failings at an early stage.



"Because of this, and given Barclays' position as one of the UK's major retail banks, we view these breaches as particularly serious and fully deserving of what is a very substantial fine."

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