Standard Life fined £2.45m for misleading savers
Pension provider Standard Life has been fined £2.45 million for misleading pension customers about underlying investment risks.
The Financial Services Authority (FSA) says that between July 2006 and February last year, the insurer produced misleading marketing material for its pension sterling fund that put its 98,000 retail investors at risk of “unexpected capital losses”.
An investigation by the regulator found marketing material promoted the fund as ‘safe’ and wholly invested in cash – whereas, in fact, the majority was actually invested in risky mortgage-backed securities.
In January 2009, Standard Life slashed the fund’s valuation by nearly 5%. Standard Life was forced to pump £102.7 million into the fund to restore the value of investors’ savings, following sharp falls in the unit price.
“It is critical that consumers are given an accurate understanding of the nature of investment products and the risks involved,” says Margaret Cole, director of enforcement and financial crime at the FSA. “Without this information, consumers are unable to make informed decisions about whether investments are suitable for their individual investment strategy.”
Standard Life’s fine was originally £3.5 million, but this was reduced as it cooperated fully with the FSA and agreed to settle at an early stage of the investigation against it.
The regulator says the “significant fine” will be the first of many this year, as it looks to crack down on financial firms that use misleading marketing material.
Cole says: “Throughout 2010 and beyond, the FSA will continue to take strong action when a firm’s financial promotions fall short of the requirement to be ‘clear, fair and not misleading’ and customers have not been treated fairly.”
A catch-all phrase that can range from assessing the price of a property or vehicle before offering it for sale or the net worth of assets in an investment portfolio to the prices of shares on a stock exchange.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.