The U.K. bank Barclays PLC was handed a $12.2 million fine and will be required to pay up to $96 million to customers who were improperly sold two stock-and-bond funds, according to an article in the Wall Street Journal by Margot Patrick. The settlement arose out of an investigation by the U.K.’s Financial Services Authority. It was the biggest fine yet for a retail matter and according to the FSA reflects the “serious failings” in the way products were marketed and determined to be suitable for investors by Barclays.
“The FSA requires firms to have robust procedures in place to ensure any advice given to customers is suitable,” Margaret Cole, FSA managing director of enforcement and financial crime, was quoted as saying; adding, “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.”
Barclays failed to ensure the suitability of the funds to some of its investors and the risks were not clearly represented to the customers in the product brochures and documents. To make matters worse, when the problem was identified by the bank, it “did not take appropriate and timely action,” according to the FSA.
The two funds in question were operated by U.K. insurer Aviva PLC between July 2006 and November 2008 and were promoted by Barclays. Mostly retirees and people closing in on retirement, representing about 12,000 of the bank’s customers, invested a total of $1.1 billion in the funds.
The article said the bank has already paid out $27 millions to some of the 12,000 customers who bought the funds in an attempt to remedy the situation and the FSA estimates another $67 million might be disbursed.
In a statement released by the bank on its website, Paul McNamare, managing director of insurance and investment at Barclays says, “We know that, on this occasion, we let our customers down and did not do all that we could have done to meet the high standards that our customers expect from us and for this we are sorry,”
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